Tides of 30.05.2007

1. The leather industry, which has sustained an annual export growth of about 15 per cent in 2006-07, could take a drastic hit in the current year due to the strengthening rupee, according to the Council for Leather Exports (CLE). Briefing reporters after a review with representatives of the Council for Leather Exports, the Union Minister of State for Commerce, Mr Jairam Ramesh, said that the CLE has sought the Commerce Ministry's assistance in bringing down transaction cost to offset the impact of rupee's appreciation against the dollar.
2. The `impossible' trinity, it is called - you cannot simultaneously control the interest rate and exchange rate and have full currency convertibility. Complete freedom in any one of these restricts your freedom of action on the others. Ambiguity and ambivalence are part of the Hindu way of life and existence. Even in economic (and political) decision-making, we postpone difficult decisions till the very end - often till it is too late. Thus, it is not surprising that we gamely continue with the impossible act of finding the right balance of interest rates, exchange rates and capital mobility.
3. Targeting a 30% jump in the sales of its `Ape' range of three-wheelers this year, Piaggio Vehicles Pvt Ltd has tied up with SBI for extending finance options to the customers. As part of the tie-up, SBI would offer finance to customers on both commercial and passenger vehicles of Ape range of three-wheelers in all branches across the country. "The finance schemes are being offered with an interest rate of Rs 11.5%. However, if one sees the market terminology of flat rates, the interest would work out to around 8% and there are no hidden charges.
4. April 2007 is a landmark month in the history of Cholamandalam MS General Insurance Company, because that is the month the company cleaned up all the red in its balance sheet. The company earned premium income of Rs 315 crore in 2006-07 and made a net profit of Rs 13 crs. In April, it made a net profit of Rs 5 crs. With this, it has wiped off the entire accumulated losses of Rs 16 crs. The company expects at least 60% growth in premium income in the current year.
5. Oriental Bank of Commerce is opening two branches in Garia and Baruipur (South 24 Parganas district) as part of its plan to expand its branch network in Kolkata region. Right now the bank has 40 branches, one extension counter and 28 ATMs in the region. It has plans to open more branches in Kolkata region as also in North Eastern states.
6. Eyeing an untapped segment of customers, school kids, Andhra Bank will be launching a campaign in schools across the country to mobilise Kiddy Bank accounts from next month. Its branches across the country will go to schools in their respective regions to mobilise Kiddy Bank accounts. It is re-launching Kiddy Bank accounts for children. As per the re-launched scheme, children in the age group of one month to 18 years (only minors) are eligible to open accounts.
7. The Government of India has increased Exim Bank's authorised capital to Rs 2,000 crs. The existing authorised capital of the bank is Rs 1,000 crs and has been fully subscribed by the Government. The bank's Capital to Risk Assets Ratio was 16.38% as on March 31, 2007 and the total assets were over Rs 26,000 crs. Key areas of the bank's lending include project exports, export lines of credit, export capability-creation finance, finance for Indian ventures overseas and for agri-business and small and medium enterprises.
8. Several indicators currently point to the boom in the Indian economy. Both aggregate GDP growth rates and investment rates have been increasing; the foreign exchange reserves keep on increasing, to almost embarrassing levels; and despite this, the exchange rate has been appreciating, largely because of capital inflows.
9. In a major setback to state-run insurers, the finance ministry has struck down their request to access the capital market with equity issues. GC Chaturvedi, joint secretary (banking & finance) in the finance ministry, said that the government did not have any plan to allow public sector insurance companies to raise money in the equity market for meeting capital requirements and expansion plans.
10. India has yet again shown its credibility as the world's most preferred BPO (Business Process Outsourcing) destination as three of its leading companies - Wipro, Airtel and Bank of India - have bagged the prestigious Outsourcing Excellence Award.The 'Best Offshore' award was bagged by Wipro-Nortel Networks for their 15 years of partnership that brought about many achievements for the offshore industry.The 'Best IT Infrastructure' award was given to Bank of India-Hewlett Packard combine for their efforts to implement a core banking solution. Bharti Airtel-Nortel Networks India won the 'Best First Steps' award for representing best practices in outsourcing.

Tides of 29.06.2007

1. Several indicators currently point to the boom in the Indian economy. Both aggregate GDP growth rates and investment rates have been increasing; the foreign exchange reserves keep on increasing, to almost embarrassing levels; and despite this, the exchange rate has been appreciating, largely because of capital inflows. Over the year ending May 4, 2007, foreign exchange reserves rose by close to $42 billion, to touch $204 billion. Two-thirds of this 26 per cent increase in reserves occurred over the first four months of this year. This galloping rise in reserve levels reflects the effort being made the Reserve Bank of India to mop up the large inflow of foreign exchange into the country. Indeed, by filling the gap between the demand for foreign exchange and its availability within the country through its own market intervention, the central bank has in the past ensured a degree of stability of the rupee.
2. Villagers in remote areas will soon have the convenience of `anytime money' that their counterparts in cities enjoy. They will have biometric-based smart cards that would allow them to go to their nearest mandal headquarter and withdraw money they receive under various social security schemes. These ATMs, or bank outposts, would be manned by `business correspondents' appointed by the banks. The Andhra Pradesh Government, with assistances from RBI and several banks, is implementing a pilot project in three mandals in Warangal district.
3. TCS has consolidated its products services business into a new business unit called TCS Financial Solutions, which will function as a dedicated product company within TCS. TCS Financial Solutions will have a separate management team with Mr N.G. Subramaniam, Vice-President and Head (Banking Practice), heading it as President. The products offered from TCS Financial Solutions will be positioned under an umbrella brand called TCS BaNCS.
4. LIC 's South Central Zone, Hyderabad, has topped all divisions of the corporation in the generation of new business premium during the fiscal year 2006-07. "The South Central Zone had collected Rs 5,968 crs of new business premium under 67.61 lakh of policies and occupied first position in the country. The new business premium had more than doubled during the last fiscal compared to Rs 2,345.9 crs in 2005-06.
5. Standard Chartered Bank is in negotiations with Securities Trading Corporation of India (STCI) to buy an initial 49 per cent stake in the investment and broking firm UTI Securities for an undisclosed amount. STCI is the holding company of UTI Securities. Through the deal, Standard Chartered will enter the retail stock broking in Asia for the first time in more than a decade. UTI Securities offers institutional broking, retail broking and online broking.
6. Trading in bad loans will get more difficult, with the Reserve Bank of India (RBI) making it mandatory for asset reconstruction companies (ARCs) to get all security receipts (SRs) rated by rating agencies for calculating the net asset value (NAV). In India, a market for bad loans was created after RBI allowed ARCs to be set up in the private sector to acquire non-performing assets (NPAs) from lenders. Normally, after buying bad loans, ARCs either restructure and rehabilitate them or liquidate the loans within a definite time frame. Companies gave lenders an opportunity to get rid of these loans that had gone into default by selling them at a discount to ARCs.
7. A clutch of financial institutions from India and overseas have invested Rs 80 crs in Financial Information Network and Operations (FINO), an IT company promoted by ICICI Bank to make financial services more inclusive. The investors include state-owned players such as the LIC, Union Bank, Corporation Bank and Indian Bank and private entities like ICICI Lombard and the IFMR Trust. Global investors include the International Finance Corporation (IFC), Legatum Finance and Intel Capital, the strategic investment arm of Intel Corporation. ICICI Bank continues to hold its initial promoter stake of 20%, while another 10% is held by ICICI Lombard and IFMR Trust. The three public sector players together hold 30% stake in the company, while all global entities, jointly hold a 40% stake in FINO.

Tides of 28.05.2007

1. RBI has sprung a surprise by hiking up the capital charge for credit risk on loans of banks. This has been done through a minor provision in the guideline for new capital adequacy framework (commonly known as Basel II norms) issued recently by the RBI. Generally, Basel II brought in additional capital requirements for "Operational Risk" and the norms were perceived to be neutral or more beneficial to banks in regard to credit risk. But in India, banks have been hit hard in regard to credit risk on un-rated borrowers.
2. State Bank of Travancore has launched a new loan scheme for pensioners from military and related services. The scheme titled `Jai Jawan pension loan', will cover pensioners who retired at an early age from armed forces, paramilitary forces, coast guards, Rashtriya Rifles, CRPF, BSF, ITBP, etc. The scheme provides for loan of up to Rs 2 lakh or 48 times the monthly pension, whichever is lower. A relaxed repayment programme is one of the features of the scheme, according to a statement from SBT. Against 60 months repayment period for normal pension loan, the `Jai Jawan' loan has a repayment period of 84 months.
3. The Hyderabad-based Institute of Chartered Financial Analysts of India (ICFAI) has derived an advantage in its legal battle against CFA Institute, USA pertaining to the use of its Chartered Financial Analyst (CFA) charter in the US and Canada. A District Court of the Eastern District of Virginia recently vacated an injunction obtained by the CFA Institute in a default judgment in October 1998 prohibiting the use of ICFAI's CFA charter in the US and Canada. In view of the vacation of injunction, over 4,000 candidates who obtained CFA charter from ICFAI are now eligible to apply for jobs in the US and Canada.
4. SBI-MUL Online Application, the online facility for processing of car loan applications on real time basis, has been launched. The new initiative envisages online connectivity between the Retail Assets Central Processing Centre of State Bank of India and major dealers of Maruti Udyog Ltd for instant transmission of car loan application details from the dealers to the processing centre. With this facility in place, it should be possible to complete the entire process of sanction and disbursement of loans within a maximum period of 48 hours.
5. Vijaya Bank has signed a MOU with Crisil. The MoU was for credit rating of micro, small and medium borrowers of the bank. Rated borrowers would be able to negotiate better credit terms with the bank. Vijaya Bank said that while ratings were not mandatory, it would encourage them in view of migration to the new capital adequacy norms of Basel-II.

Tides of 26.05.2007

1. Housing Development Finance Corporation Ltd would raise Rs 3,114 crs through preferential issue of shares to two foreign investors, The Carlyle Group and Citigroup Strategic Holdings. The global private equity firm, The Carlyle Group, will purchase 15.25 mn new shares in HDFC at Rs 1,730 per share. On closure of the transaction, Carlyle will own a 5.6% stake in HDFC.
2. The country's foreign exchange reserves fell by $9 million to $203.98 billion for the week ended May 18, due to a drop in foreign currency assets. Forex reserves had fallen by $18 million to $203.99 billion in the previous week.
3. IndusInd Bank has reported a net profit of Rs 21.4 crs in the fourth quarter of 2006-07, against a loss of Rs 62.4 crs in the previous year on lower provisioning. All the key ratios of the bank were looking better. The bank had reported a loss in the fourth quarter of 2005-06 as a large oil refinery's account was shifted to the Credit Deposit Ratio Mechanism. Net interest income increased by 8.95% to Rs 85.81 crs (Rs 78.76 crs). Other income rose to Rs 56.82 crs (Rs 36.35 crs).
4. Seven public sector financial institutions have evinced interest to manage the pension funds under the new pension scheme (NPS).The institutions that have submitted their bids to the Pension Fund Regulatory and Development Authority (PFRDA) are LIC, SBI, UTI Asset Management, Canara Bank, State Trading Corporation of India, PNB and IDBI Capital.
5. The scramble to keep pace with credit growth will push up banks' cost of deposits by 50 bps in 2007-08, says a report by Crisil. It feels that banks may not be able to pass on increasing costs to borrowers as further increases could significantly hamper growth or force borrowers to look at alternative avenues. Cost of deposits had risen by 60 bps to 5.1% in 2006-07. "Incidentally, despite the increase in the cost of deposits, the banks' net profitability margin increased to 1.55% in 2006-07 from 1.32% in 2005-06, as banks passed on the increase in costs to their borrowers."
6. Bank of Baroda intends to open ten overseas branches this year. These will be at Port of Spain (Trinidad & Tobago), Accra (Ghana), Bahrain, second branch in Johannesburg (South Africa), ninth in UK, second in Tanzania, second in Botswania, eighth in Kenya, Canada and one representative office in Australia. In addition, a joint venture company, along with PNB and Andhra Bank would be set up in Malaysia.
7. The Union Bank of India will be opening up seven more overseas branches in the current financial year. RBI had given approval for setting up the branches, and the bank had approached the authorities of the respective countries in this regard. It would be setting up its overseas branches in Shanghai, Beijing, Xinjiang, Hong Kong, Doha, Dubai and Singapore and accordingly the requisite measures were being taken.
8. Bank customers can now appeal against the decision of the Banking Ombudsman if he has rejected the customer's complaint, provided the complaint falls within the matters specified under Banking Ombudsman Scheme. RBI has amended the Banking Ombudsman Scheme, 2006 to enable this provision. Before the scheme was amended, the bank customers could appeal only against the awards given by the Banking Ombudsman.
9. South Malabar Gramin Bank has registered a 20% growth, taking its total business to Rs.3,144 crs in the last fiscal. The deposits and advances increased by Rs.171 crs and Rs.359 crs respectively. The credit deposit ratio of the bank stood at 123%, which was the highest in any bank of the State. The State average is 70%.

Tides of 25.05.2007

1. Union Bank of India has launched biometric cards to facilitate `door step banking' in rural areas. The bank has tied up with Financial Information Network and Operations Ltd (FINO) and Cashpor Micro Credit to launch a pilot project in Chahania Block in Chandauli district, Uttar Pradesh. So far, 1,000 smart cards have been issued in four villages and the aim is to issue 5,000 such cards initially. FINO will provide technical support, which will enable the bank to leverage on technology to serve its customers. Union Bank of India also has financial stake in FINO.
2. Catholic Syrian Bank has posted a 210% increase in the net profit to Rs 19.07 crs for 2006-07, compared with Rs 6.14 crs the previous year. It has recommended a dividend of 15%.Operating profit grew to Rs 62.64 crs (Rs 36.99 crs). Net interest income grew to Rs 164 crs (Rs 147 crs). Net NPAs were reduced to 1.98% (2.78%). The bank also recorded capital adequacy ratio of 9.58% against the RBI-stipulated norm of 9%.
3. Centurion Bank of Punjab recorded a 7.6% rise in its net profit to Rs 28.01 crs in the fourth quarter ended March 31, 2007 against Rs 26.04 crs in the corresponding quarter previous year due to a strong growth in advances. It achieved this increase after a one-time reduction of Rs 13.2 crs due to the revised standard asset provisioning norms as prescribed by the RBI. The bank plans to raise about Rs 700-crs Tier-II capital this fiscal. Capital adequacy ratio is at 11.05% (12.5%).
4. Tavant Technologies, provider of IT solutions to the mortgage industry, and Overture Technologies, mortgage industry's developer of automated underwriting systems, have announced the launch of an end-to-end lending solution for Conduits and Correspondents. This solution, which can be customised, will allow users to foster relationships with correspondent partners and improve the efficiency of loan transactions and securitisation operations, a company release said. Tavant and Overture using Overture's Mozart Product Suite, offer solutions for loan acquisition, loan execution, securitisation and portfolio management specifically for Conduits and Correspondents.
5. Punjab National Bank has received the licence for opening a full-fledged branch in Hong Kong. It will be opening its Hong Kong branch before July 31. PNB had recently operationalised its London subsidiary. It also plans to open an offshore banking unit in Singapore this fiscal.
6. Now, you do not even have to drive to your nearest ATM to withdraw cash. Instead, you can call up your bank branch or make an online request and have the cash delivered right at your doorstep. Taking the doorstep banking service one step forward, the RBI has allowed banks to deliver cash at the doorstep of individual customers. The RBI decision follows the suggestions made by the Indian Banks' Association to extend this facility to individual customers. Earlier this facility was restricted to corporate customers.
7. State Bank of Travancore hopes to achieve total business of Rs 1 lakh crs over the next three years. The optimism of the management stems from the fact that the bank's business crossed the Rs 50,000-crs mark and reached Rs 56,065 crs in 2006-07. For the current year, SBT is aiming at a total business of Rs 69,150 crs, representing an increase of 23% over last year.

Tides of 23.05.2007

1. RBI pursuing a growth-oriented policy with a careful watch on inflation, has been moderating liquidity throughout 2006-07 and 2007-08 by raising the repo rate and the Cash Reserve Ratio. By raising these key rates the central bank expects loans, especially for real-estate and housing, to become costly, and thus control money supply. The RBI has also been tightening the flow of bank credit to the commercial sector. Though the central bank has been resorting to the Market Stabilisation Scheme to neutralise money expansion due to foreign inflows, this is the first time it has moved boldly to increase the outflow of forex reserves. Thus, to reduce money supply as well as take yet another step towards fuller Capital Account Convertibility the RBI has taken the following steps. It has: Liberalised overseas investment norms (for joint ventures) by Indian investors, increased the limit of portfolio investment from 25 per cent to 35 per cent of net worth of companies; upped mutual funds' overseas investment limit to $4 million from $3 million, raised the pre-repayment limit of external borrowings to $400 million from $300 million, and allowed individual investors to remit up to $1,00,000 for the financial year for any current or capital account transaction or a combination of both. The RBI has also provided hedging facilities in terms of price risk or domestic purchase and sale. In many cases, authorised dealers have been permitted to allow Indian companies remit more foreign exchange for donations, consultancy services, for pre-incorporation expenses and for the purpose of oil exploration. The increased outflow should act as a counter to the expansion of reserve money by the RBI and finally on the growth of overall money stocks (M3). The RBI has also observed that "Growth in Reserve Money during 2006-07 was driven largely by the expansion in the central Reserve Bank's net foreign assets."
2. The net profit of South Malabar Gramin Bank has gone up by 26% to Rs 21.54 crs (Rs 17.03 crs) for 2006-07. The total business grew by 20% to Rs 3,144 crs.It recorded a credit deposit ratio of 123% with 90% of the loans going to the priority and weaker sections. The total deposits grew to Rs 1,408 crs while advances touched Rs 1,736 crs. The bank extended Rs 419.25 crs through 1,46,304 kisan credit cards. As per the Government policy of doubling credit flow to the agricultural sector in three years, the bank increased its credit disbursement to Rs 1,208 crs (Rs 960 crs), against a target of Rs 1,055 crs.
3. In a bid to place co-operative banks (urban and rural) at the lip of modern knowhow, I-Pay Clearing Services Ltd, a software solutions provider, will soon offer "e-passbooks" to them. The "e-passbook" will contain details of a customer's savings account. A customer will be able to check the last 10 transactions on a self-service terminal or kiosk, do internal account to account money transfer, request for a cheque book and get other details of recurring accounts and loans.
4. Bank of India has signed a memorandum of understanding with National Bulk Handling Corporation Ltd (NBHC), a group company of Multi Commodity Exchange (MCX), for lending against warehouse receipts. Of its Rs 3,550-crs crop-financing corpus, the bank has set aside Rs 2,000 crs for warehouse lending. NBHC has arranged over Rs 1,300 crs in the last 3-4 years.
5. ICICI Bank has stepped up its support to realty market in Mysore by launching a 48-hour home loan-processing scheme. The fast track scheme was introduced last week. Announcing its launch at the ‘My Realty-2007’, bank’s emerging market mortgage finance group national head Satish Kulkarni said, “If we do not do it (process within 48 hours), we will refund the processing fee.”
6. Andhra Bank launched ATMobile, its new mobile biometric-access ATM initiative, in Hyderabad. The bank flagged off two mobile biometric-access ATMs here, one each for the Twin Cities of Hyderabad and Secunderabad, which would stop at locations scheduled by the Reserve Bank of India (RBI). Targeted at reaching out to a large section of semi-literate and illiterate customers, the mobile biometric ATMs would identify the customer based on his fingerprints.
7. The government said it aims to slow down the flow of foreign debt into the real estate sector through its recent curbs on external commercial borrowings (ECBs). The finance ministry on Friday barred those setting up integrated townships from raising ECBs and made it difficult for small players to raise such borrowings by lowering the ceiling on the interest rates to be paid on such debts.
8. Syndicate Bank is planning to hit the capital market with follow-on public offer of eight crs equity shares (face value Rs 10 each). It will use proceeds of the issue to shore up the capital for credit growth and comply with Basel II norms by March 2008. SBI, ICICI Bank (Rs 20,000 crs), HDFC Bank (Rs 4,200 crs) and Federal Bank have already announced plans to raise capital from the equity offering.
9. Standard Chartered Bank’s Indian operations reported 51% rise in net profit in 2006-07 to Rs 1,364 crs from Rs 904.8 crs a year earlier on higher interest and fee income. The share of Indian operations in the bank’s global profits increased to 12.6% from 8.8% in 2005. It has invested Rs 1,360 crs in the Indian operations in 2006-07 against Rs 1,300 crs a year earlier. This investment is by way of profit retention as well as fresh infusion.
10. Corporation Bank has gone ahead and launched its credit card business following delays in its proposed joint credit card foray with alliance partners, Oriental Bank of Commerce and Indian Bank. The three public sector banks had signed a MoU for alliance in November. However, with the OIC joint credit card venture expected to take at least another nine months to get off the ground, the Corporation Bank has decided not to delay its credit card foray any longer. It has tied up with Visa International for its credit card business.
11. With the objective of imparting training on agriculture and allied activities to farmers, Punjab National Bank (PNB), in association with State Institute of Rural Development (SIRD), recently opened a Farmer Training Centre (FTC) in North East. Located at Kahikuchi outside Guwahati, it was the first training centre in the region.
12. To achieve financial inclusion in rural India, SBI has taken up a plan to reach 100,000 unbanked villages in the country within the next two years. It aims is to open at least one bank account for each family in these villages. SBI has relaxed the terms and conditions for opening a bank account under this programme.

Tides of 21.05.2007

1.With the strengthening of the rupee against the US dollar, Indian exporters are exploring euro-denominated trade opportunities, according to a survey on exports conducted by the industry chamber FICCI. A combination of factors such as rising cost of raw materials, hike in interest rates and appreciating rupee has eroded the confidence level of Indian exporters, according to the survey. Margins of the exporters are getting squeezed to the point where some of them are contemplating catering only to the domestic market for the time being.
2.Mr Sunit Arora bought an ASSAY-certified 20 gm gold bar from a leading bank for Rs 21,098.08 on Akshaya Trithiya, hoping to get better returns at a later date. Little did he know that banks do not have a buyback policy linked to their gold-coin sales. "I was told that the coins/bars were not sold with a buyback guarantee and that I should try selling to a jeweller. I wanted to encash it even though the gold rate had taken a dip from the price I bought it,'' said Mr Arora. What's more, Mr Arora had paid Rs 2,300 premium over the then market rate for the 20-gm bar. Bankers have a totally different view on this. "RBI guidelines prevent us from buying back the gold coins sold to customers. They can pledge the coins and raise money against it."
3. Oriental Bank of Commerce plans to raise more capital in July to fund business growth. The bank had in mid-April raised about Rs 500 crore of tier-II capital through bond offering at a cost of little less than 10 per cent. "We are yet to decide on whether the capital raising in July would be under tier-I or tier-II. We will raise more capital to fund business growth and also to meet Basel-II requirements," a senior official of the bank said.
4. Most of the internationally active banks are more or less ready to meet Basel II requirements by 2008. In fact, some have prepared parallel balance sheet for 2006-07. However, that was not for any publication, but to understand what could be the impact of Basel II implementation on these banks. The other banks, by and large in the system, would be ready by 2009. Some would be having problems, as even urban cooperative banks are included in that. Such banks may find it difficult. Bankers expect that the Reserve Bank of India will give some more time to the weaker groups.
5. Karnataka Bank Ltd, which registered a growth of Rs 1 cr in net profit during 2006-07, has proposed a dividend of 35%. It has reported a net profit of Rs 177.03 crs for 2006-07 as against Rs 176.03 crs for 2005-06. The bank could show comfortable net profit, in spite of increased provisioning for depreciation on investments in the rising interest rate scenario.
6. Lakshmi Vilas Bank has proposed to raise the interest rate on the medium and long-term domestic deposits by 50 to 125 bps w.e.f May 21. For periods ranging between 181 days and 364 days, the rate is being raised to 8.25% (7.75%), between one and two years to 9.50% (8.25%) and maturity period beyond two years to 9.75% (8.75%). Besides raising the rates, it is also proposing to introduce an 18-month special deposit scheme at 10.25% (regular) and pay an additional 50 bps for senior citizens. This scheme, according to its release, would have a lock-in period of one year and be on offer up till end-September.
7. Loans to members of the minority communities who belong to the weaker sections of the society will be included under the priority sector advances of banks. The weaker sections under the priority sector as defined by the RBI include small and marginal farmers, landless labourers, tenant farmers, artisans, scheduled castes and scheduled tribes, self-help groups, among others. In a notification issued, the RBI said that the recently issued guidelines on the priority sector have been modified to include loans granted to persons who belong to the weaker sections and are from minority communities, as may be notified by the Government from time to time.
8. The government is considering a proposal to merge financially sound urban co-operative banks with private sector banks. Since private sector banks are finding it difficult to grow organically through the expansion of branches, it is felt that this is one way to ensure a good growth. According to the RBI licensing policy, new- generation private banks should be well spread out with a presence in urban, semi urban and rural areas. But except for a few, most smaller new-generation private sector banks are finding it difficult to grow and have restricted themselves to urban areas. Urban co-operative banks (UCBs), on the other hand, have limited presence and are too localised. They are also finding it difficult to raise funds given the enhanced capital requirements for UCBs with deposit above Rs 100 crs post-Basel-II norms, becoming effective from March 2009. Depositors of these banks also will get a bargain by shifting to bigger banks with a professional management structure. This could therefore lead to a win-win situation forboth. The suggestion has been sent to the RBI for its views. The apex bank, however, feels it will be difficult to assess the implications till a proposal comes up for examination.
9. RBI has allowed HDFC Bank to start a non banking finance company. The NBFC, to be set up by HDFC Bank, will be a wholly owned subsidiary and will undertake retail operations such as auto, personal loans etc. The bank does not rule out the option of roping in a partner with a minority stake. HDFC Bank also plans to start overseas operations in Singapore, Bahrain and Hong kong soon.
10. You need not visit a bank branch or log on to internet for transferring money from your account. Just walk into an automated teller machine (ATM). This comes in the wake of six Indian banks deciding to offer fund transfer facility through ATMs through a shared network - Mitr. The banks, Punjab National Bank (PNB), Indian Bank, Oriental Bank of Commerce (OBC), Karur Vysya Bank, IndusInd Bank and UCO Bank, are part of the ATM sharing network, Mitr, with PNB as the settlement bank. This inter-bank network of 2,600 ATMs will be managed by FSSNet. Besides options for balance enquiry, cash withdrawal and cash deposit, the main menu of the ATM would now also include a fund transfer option. The customer can transfer money by entering details of the account to which funds are to be moved.
11. Life Insurance Corporation of India is interested in picking up stakes in banks that have good financials and performance, with the insurer likely to prefer banks with which it has bancassurance tie-ups. Bancassurance enables the insurer to distribute insurance products through a bank’s network.

Tides of 19.05.2007

1. The net profit of the Federal Bank has increased by 29.98% for the year ended March 31 at Rs 292.73 crs against Rs 225.21 crs in the corresponding previous fiscal. The total business of the bank reached Rs 36,483.54 crs, with an increase of Rs 6,868.33 crs over the previous fiscal. The deposits grew by Rs 3,705.70 crs to Rs 21,584.44 crs. The advances went up Rs 3,162.63 crs to Rs 14,899.10 crs (Rs 11,736.47 crs) driven mainly by the growth in retail and SME advances. It has recommended a dividend of 40 % against 35% last year. The earnings per share increased to Rs 34.20 from Rs 32.71.
2. PNB has entered into a strategic alliance with Crisil for risk rating of SME customers of the bank. SME borrowers of the bank can now get themselves rated by Crisil to avail adequate and timely credit from the bank. A rating increases the comfort level to both the lender and the promoter of the SME.
3. Corporation Bank has launched `Corp Compassion' scheme to help underprivileged children. It will donate Rs 10 to the underprivileged children for every account opened under the `Corp Compassion' scheme.The campaign to open savings bank accounts under `Corp Compassion' will run from June 1 to July 31.
4. Public sector banks have begun moves to impose a ceiling on bulk deposit interest rates in a bid to contain costs and defend the current net interest margins (NIM). High-level bankers said that some PSBs have initiated discussions for an informal ceiling, especially after events in March-end when bulk deposit rates topped 12.5%.
5. Non-food credit dropped by Rs 20,103 crs to Rs 18,39,671 crs. Gross bank credit has gone down by Rs 16,571 crs to Rs 18,89,557 crs as of April 27, according to RBI's Weekly Statistical Supplement. Food credit increased by Rs 3,532 crs to Rs 49,887 crs.
6. Bank of Baroda is offering 9.5% per annum for one-year fixed deposit. "The scheme provides for investing any amount as low as Rs 1,000 and there is no lock-in period. Senior citizens will get a higher interest rate of 10% pa.
7. Indians can now wait up to six months before exchanging foreign exchange received from non-residents or lying unused from an overseas trip. Until now, individuals were required to get foreign currency within as early as seven days for some payments. The RBI move to allow individuals to hold on to foreign currency for a longer period is a small step in the move toward capital account convertibility. To a small extent, individuals holding foreign currency can take a view on the rupee. For instance, if someone believes that the current weakness in the dollar is temporary and the greenback may appreciate, they can hold on to their foreign exchange.
8. The government has blocked the external commercial borrowing (ECB) window for integrated townships and made it extremely difficult for small and medium companies to borrow overseas. In a late evening press statement, the finance ministry pruned the all-in-cost ceilings over six-month Libor for ECBs with 3-5 years of maturity by 50 bps to 150 bps. For ECBs with over five-year maturity, the ceiling is now 100 bps lower at 250 bps.
-->What this means is companies can bring in foreign money only if they are able to borrow 3-5 year debt at Libor plus 1.5% (or 6.87%, given the six-month Libor at 5.37%). For maturity over 5 years, foreign banks and institutions should be ready to lend at 7.87%.
9. Aditya Birla Retail will invest Rs 9,000-Rs 10,000 crs for setting up over 1,000 supermarkets and hypermarkets in the next three years across India. But no listed company of the Aditya Birla group will have a stake in the retail venture. “Our mission is to change the way people shop. We will give them more,” Kumar Mangalam Birla, chairman, Aditya Birla group, said here while announcing the foray. And, ‘more.’ is what Birla has decided to call the newest baby.
10. Indian Bank has launched biometric-enabled Smart Cards to deliver banking and financial services at the doorsteps of the common man.

Tides of 18.05.2007

1. HDFC Bank plans to raise around Rs 4,200 crs from the equity markets ahead of the Basel-II guidelines. Given the bank's strong positioning in each of its major franchises (retail, corporate and treasury), it is important that it is adequately capitalised to support growth plans. The bank adds further incremental capital would also facilitate meeting the changing regulatory requirements such as the proposed capital adequacy framework (based on Basel-II accord) and the new capital market exposure norms.
2. British bank Barclays launched its retail operations in India, opening three branches, two of them in non-metro centres in the South, Kanchipuram in Tamil Nadu and Nelamangala near Bangalore. The third branch is in Mumbai. The bank had applied for branch licences across the country but was given these three for the time being.
3. RBI has allowed banks and primary dealers to use plain vanilla credit default swaps to buy and sell protection against credit defaults. The participants in the credit derivative market can be broadly divided into protection buyers and protection sellers. For now, only banks and PDs will offer these products. However, the apex bank will consider allowing insurance companies and mutual funds and when their respective regulators permit them to deal in credit default swaps. The RBI has said all parties should be Indian and the deals have to take place in rupees.
4. Centurion Bank of Punjab is still on the prowl for more mergers and acquisitions in its bid to aggressively grow in size. It is committed to acquisitions and mergers as a strategy for growth.The bank was awaiting the clearance of the RBI and the Kerala High court for completing the acquisition of the Lord Krishna Bank. This was likely to be completed by the end of the first quarter of this financial year. The bank had also sought approval from the RBI for private placement of 9.5 crs shares with Bank Muscat for raising Rs 250 crs.
5. To recover its dues, the Industrial Finance Corporation of India has advertised for sale of one of the units of Arihant Industries Ltd at Baddi, Himachal Pradesh. The reserve price for the unit is Rs 45 crs. The unit is located on about 28 acres of land and is eligible for tax concession from the central and state government.
6. The Cabinet will take up a proposal to allow public sector enterprises (PSEs) invest their surplus funds in mutual funds. With state-owned companies sitting on cash surpluses worth a whopping Rs 2 lakh crs, a Cabinet approval to the proposal will lend a big boost to the capital markets. Even a small percentage of this money entering equities indirectly through mutual funds will pep up the markets. Currently, PSEs are prohibited from parking excess cash in mutual funds. If the embargo is lifted, it will strengthen the mutual fund industry, too. The assets under management of mutual funds in India are worth over Rs 3.5 lakh crs now. PSEs’ surplus cash is expected to have crossed the Rs 2-lakh-crore mark this fiscal since the number of profit-making enterprises had gone up to 157 by the end of 2006, from 138 in 2004-05. The number of loss-making PSEs declined to 58 in 2005-06 from 79 in 2004-05. Several state-run oil firms are sitting on heavy cash surpluses.

7. Aditya Puri, CEO & MD of HDFC Bank, has said that the recent legislation allowing the RBI to do away with the floor on banks’ government securities investments would make his bank’s merger with its parent company, Housing Development Finance Corporation , a lot easier. Mr, Puri, when asked about a merger with HDFC, said, “We have never said no to a merger.” The view would get better, if the statutory liquidity ratio (SLR) was reduced from 25%.The SLR requirement for banks are currently at 25% of the net liabilities and lowering the base will help the merged entity maintain liquidity and carry on business as usual. At 25% SLR, any merged entity will have to borrow funds for reserve requirements. The other option will be to reduce lending or call funds back from borrowers to maintain the RBI’s mandatory reserve obligations.
8. Union Finance Minister P. Chidambaram assured the Rajya Sabha on Thursday that the Government would not make any effort to shed controlling stake in public sector banks (PSBs). He gave the assurance while piloting a bill that would allow State Bank of India to reduce its holding in seven subsidiary banks to 51 per cent. The Rajya Sabha later passed the State Bank of India (Subsidiary Bank Laws) Amendment Bill by a voice vote.
9. The four unlisted associates of the SBI propose to raise Rs 2000-3000 crs from the market in the calendar year with the Lok Sabha clearing the SBI Subsidiary Bank (Amendment) Bill. State Bank of Indore, State Bank of Patiala, State Bank of Hyderabad and State Bank of Saurastra are governed by three different acts.
10. Higher net interest income and lower provisioning have helped banks to post record net profit growth in the last five quarters. The PSU banks outperformed the private sector banks for the first time after a gap of five quarters on the back of robust net profit growth reported by SBI. The 30 public and private sector banks which declared their results for the quarter ended March 2007 have posted 37 per cent growth in net profit. This is the highest bottom line growth in the last five quarters. They had posted 42% rise in net profit in the December 2005 quarter. These 30 banks posted a combined net profit of Rs 6,428.47 crs in the March, 2007 quarter against Rs 4,704.64 crs in the quarter ended March 2006. Higher net interest income helped the banking sector to post higher net profit growth during the quarter. The total net interest income of the 30 banks increased by 26% to Rs 18,742.53 crs in the March, 2007 quarter against Rs 14,929.26 crs in the preceding quarter, while the provisioning and contingencies increased by 23% compared with 485. A 28% loan growth in the Indian banking sector in the year end March 2007, following a 35% average annual expansion in the previous two years benefited the banking sector. The banking sector has given loans to companies, individuals and farmers during the quarter. The twenty PSU banks have posted a combined 42% growth in net profit, compared with 22 per cent bottom line growth reported by the private sector banks. Twenty-one PSU banks recorded a combined net profit of Rs 4,878.43 crs in the March, 2007 quarter compared with Rs 3,437.34 crs in the corresponding quarter last year, while nine private sector banks posted a net profit of Rs 1,550 crs compared with Rs 1,267.30 crs.
11. With a business mix of about Rs 1.5 lakh crore, Union Bank of India has positioned itself as a national bank. For moving into the global league, the public sector bank would prefer merging with an equal-sized bank rather than going through the “pains” of acquiring small banks.
12. The government proposes to restructure the equity of Punjab and Sind bank for enabling it to access the capital market for raising funds.The government’s move follows the bank’s proposal to reduce the equity base which currently stands at Rs 743 crs. The bank has proposed to reduce the equity base to Rs 243 crore by converting the remaining equity of Rs 500 crore into preference shares. This will help the bank to launch a public issue and serve the shareholders better, since the equity base will be small.
13. The booming consumer finance space and the growing opportunities in corporate finance is forcing foreign banks to set shop in India. The Australian banks have a particular interest in India on the back of the growing trade relations between the two countries and corporate flows. After Macquire, the newest entrant is the Australian-based Westpac Institutional Bank. Westpac has opened a representative office in Mumbai after getting a license within three months. The bank has an alliance with Standard Chartered Bank (SCB), India.

Tides of 17.05.2007

1. The Standing Committee on Finance has urged the Government to hold detailed consultations on the proposed National Payment Corporation of India (NPCI), which is expected to take over the operations of retail payment systems in the country. The suggestion follows reservations expressed by the Reserve Bank's Officers and Employees Association. The consultations should cover the `business model' envisaged, terms and conditions of licensing the proposed company and service conditions of employees currently engaged in clearing house operations, the Standing Committee said in its report on the Payment and Settlement Systems Bill 2006.
2. Overall liquidity management has been a challenge in the past five to six months but the RBI has to deal with it, said Dr Rakesh Mohan, Deputy Governor, RBI. "Increased volatility in capital flows tending to inject excess liquidity into the system and bunching of tax payments that suck liquidity out of the system, have made the task of liquidity management somewhat more difficult over the past year," he said at a seminar on `European financial markets'. On the RBI's intervention in the forex market, Dr Mohan said the central bank does intervene in the currency market but the volume of intervention was smaller than the total turnover in the forex market. Exchange rate is market determined.
3. Bank of Baroda and Dun & Bradstreet (D&B) have signed an agreement under which D&B will assign ratings to the bank's small-scale industry (SSI) customers.Under the arrangement, Bank of Baroda will refer its existing and prospective SSI customers to D&B for rating. A discount will be offered to BOB customers in addition to the subsidy made available from National Small Industries Corporation (NSIC).
4. Shripal Morakhia, promoter of Mumbai-based financial services firm SSKI Financial, is ready to sell his 37% in Sharekhan Securities. Citigroup Venture Capital International is tipped to be preferred by Morakhia ahead of others for picking up a substantial stake in the retail brokerage arm of the Mumbai-based SSKI group. Others in the race include Baring Private Equity, TPG and 3i.
5. The finance ministry and the RBI are struggling to answer questions like who belongs to a minority community or which are the minority-dominated areas in the country. Sikhs are identified as a minority community in India but form majority in Punjab. Similarly, a Hindu should get minority status in Jammu & Kashmir. Finance ministry and RBI officials say they are finding it difficult to answer these as they sit down to frame guidelines for banks on lending the minority groups. These issues are causing confusion in formulating the final guidelines despite the fact that 103 districts in India have already been identified as areas dominated by minority communities.
6. United Spirits Ltd. (USL), the flagship of the UB group, has acquired 100% stake in Whyte & Mackay (W&M), a leading distiller of Scotch Whisky, for a consideration of £595 million (Rs. 4,800 crs). In terms of financing the transaction, USL has a large amount of treasury stock which will be sold to part finance the transaction and reduce the debt. The acquisition cost will be through non-recourse finance to USL. We have tied up a £325-mn loan from ICICI Bank with a moratorium of two years and the loan carries on for nine years. It has also tied up a £210-mn loan from Citibank with a moratorium of up to 30 months and thereafter for five years.
7. ICICI Bank is likely to offer its shares at a discount to the retail investors in its forthcoming equity issue. This is however subject to approval by the market regulator, SEBI. The bank, in an attempt to encourage retail participation, has also permitted the existing retail shareholders and retail individual bidders to bid at the cut-off price. It is planning to raise Rs 17,500 crs through domestic and American depository shares. It is entitled to retain 15% of the issue under the greenshoe option in case it gets oversubscribed. The total issue size inclusive of the green shoe option will be Rs 20,125 crs,
8. The commercial banks have begun issuing passbooks and account statements to the customers every month without charging any fees, following the diktat from the RBI. The banks were earlier issuing quarterly account statements. A customer wanting monthly account statements had to pay anywhere between Rs 100 and Rs 250. This step is expected to increase the costs of operations of both private and foreign banks. Since March, ICICI Bank has given its customers the choice to opt for a passbook or to continue with quarterly statements of account. The bank has around 13 mn account holders.
9. SBI would be at the mercy of Industrial & Commercial Bank of China unless the government allows takeovers to bridge an $800 billion gulf in assets. "If ICBC comes to India, State Bank will be nowhere,'' Chairman Om Prakash Bhatt said. SBI wants the government approval to merge with seven units to add 50% more branches and boost lending. While State Bank extends one in six loans in India and controls almost a quarter of Indian banking assets, it only ranks 69th globally. ICBC, based in Beijing, is worth more than the entire Indian banking sector seven months after it sold shares in the world's biggest public offering.
10. RBI has rejected IndusInd Bank's application to appoint Michael Bastin as the non-executive chairman of the bank. Michael Bastin was the ex-chairman and managing director of Syndicate Bank and has also worked as a general manager in Union Bank of India.

Tides of 16.05.2007

1. Dhanalakshmi Bank's net profit has grown 70% and touched Rs 16.14 crs (Rs 9.52 crs) for the year 2006-07. The operating profit has, meanwhile, grown 67% to Rs 38.64 crs (Rs 23.09 crs).
2. Private sector non-life insurers have expanded their share in 2006-07 (FY07) to 35 per cent in an intensely competitive domestic market.Private sector share in the non-life insurance market in 2005-06 was 26 per cent, according to figures released by the Insurance Regulatory and Development Authority. Non-life insurers' gross premium flow was Rs 25,002.45 crore in FY07 against Rs 20,431.82 crore, a growth of 22.37 per cent.
3. The Lok Sabha cleared the decks for the seven subsidiary banks of SBI to approach the capital market for raising resources to fund business growth and also meet the Basel-II norms on capital adequacy. The House cleared the State Bank of India (Subsidiary Banks Laws) Amendment Bill, 2007, that seeks to lower the minimum shareholding of SBI in its seven subsidiary banks to 51%, provide more autonomy to the boards of these banks, allow these banks to issue preference shares and ensure the presence of a RBI nominee on their boards.
4. Franklin Templeton Investments has signed a MOU with Central Bank of India for distributing its products. One-third of Franklin Templeton's assets in India comes from the banking segment.
5. Karnataka Bank Ltd has opened its fifth service branch at Mangalore.This is the first non-metro service branch of the bank. The service branch will help in providing quick inter-branch services.
6. SBI, India’s biggest lender, plans to raise Rs 15,000 crs within the current financial year to bolster capital and meet the growing credit demand. The funds will be raised through a mix of debt and equity. SBI is in discussions with six to seven investment bankers to decide the right mix and timing for raising the funds. The bank plans to raise as much as Rs 6,000 crs through share sale.

Tides of 15.05.2007

1. RBI purchased $2.3 bn in March, according to figures provided in the table on the sale/purchase of the US dollar by the RBI. It has purchased $26.8 bn during the fiscal ended March 2007. That would have released rupee currency equivalent to Rs 1,18,994 crs into the system. Forex reserves had risen by nearly $40 bn during the fiscal ended March 2007. The bulk of the purchases came in the month of February when the RBI bought nearly $12 bn.
2. Indian Bank has announced audited consolidated results of the bank and its three subsidiaries Indbank Merchant Banking Services Ltd, Indbank Housing Ltd and Indfund Management Ltd for the year ended March 31, 2007. The consolidated operating profit of the bank increased by 53.85% to Rs 1,386.15 crs against Rs 900.96 crs in the previous year. Consolidated net profit increased to Rs 810.03 crs for 2006-07, up 57.14% over the previous year's Rs 515.47 crs. Indbank Housing registered a net profit of Rs 25.21 crs, while Indbank Merchant Banking and Indfund Management registered profits of Rs 21.17 crs and Rs 2.50 crs, respectively.
3. Trading in securitised debt instruments or certificates on the country's stock exchanges may soon become a reality, with the Lok Sabha today passing a Bill that provides the legal framework for listing and trading of such instruments. The Securities Contracts (Regulation) Amendment Bill 2007 was passed by voice-vote without any discussion. This Bill, revised, also specifies that issuance of securitised debt instruments would be governed by `disclosure-based regulations' of SEBI as against the earlier planned approval-based approach.
4. In what will be another instance of an Indian fund house leveraging the strengths of its overseas partner, SBI Funds Management aims to work out a product for international investors that will be distributed abroad by Societe Generale (SG). SG, which holds 37% in the Indian asset management company, will be responsible for marketing the fund, which will be managed in India.
5. For borrowers worried about the Basel II regime, this should be music. Interest rates could actually come down for some classes of borrowers, especially those with high credit ratings. Bankers said that corporate ratings would now begin soon for all classes of borrowers above Rs 5 crs. Currently, only instruments are rated and migration to corporate ratings has begun, bankers said. RBI's draft guidelines prescribe a risk weight of 20% on corporates falling within the rating scale "AA", 50% on "A", 100% on "BBB" and 150% on "BB" and below.
6. Karnataka Bank Ltd has opened its fifth service branch at Mangalore.This is the first non-metro service branch of the bank. The service branch will help in providing quick inter-branch services.
7. SBI, India’s biggest lender, plans to raise Rs 15,000 crs within the current financial year to bolster capital and meet the growing credit demand. The funds will be raised through a mix of debt and equity. SBI is in discussions with six to seven investment bankers to decide the right mix and timing for raising the funds. The bank plans to raise as much as Rs 6,000 crs through share sale.

Tides of 13.05.2007

1. ICICI Bank is raising £ 350 mn under a medium term note programme to mark the inaugural deal in the sterling market from an Indian issuer and also the largest deal in the sterling market from Asia. It has priced its three-year fixed rate offering at a spread of 83 bps over the UK gilts. The deal generated good investor response resulting in the deal being upsized to 350 million. The offering had a 460-mn order book with a total of 32 investors," said a BSE announcement. The offering received 95% participation from the UK and the rest from other parts of Europe.

2. Against the backdrop of a 30% plus growth in profits of other public sector banks, a 3% growth in profits by SBI for the current fiscal may seem a bit disappointing. However, this performance has to be seen in the context of the contribution of a number of one-time events (gains from India millennium deposit scheme, write-back of provisions, etc) to the profits in the previous fiscal 2005-06. SBI's fourth quarter performance, however, was a surprise. Given the poor show in the fourth quarter by ICICI Bank, its nearest competitor, expectations on SBI's performance in this quarter were muted. ICICI Bank suffered because of higher provisions that were required by regulators on personal loans, home loans and credit card outstandings.

3. SBI has proposed to enter into a slew of new businesses, including private equity. It has identified at least three other businesses that it hopes to enter - general insurance, merchant acquisition, financial planning & wealth management. Besides, it is also keen to embark on pension fund management, subject to regulatory approval.

4. The Bank of Rajasthan Ltd has announced a bonus issue in the ratio of 1:4. It has recommended a 20% dividend to shareholders for 2006-07.

5. Global financial services company Citi has launched a new advertising campaign for enhancing its corporate brand identity.

6. City Union Bank will make preferential issues to six investors subject to approval from its shareholders and the Reserve Bank of India.

7. The corporate sector paid Rs 11,541 crore in dividend in 2006-07, up 12.5% from Rs 10,258 crore in 2005-06. According to a study, the net profit of 209 companies rose 41.2%, from Rs 39,785 crore in 2005-06 to Rs 56,190 crore in 2006-07. The ratio of dividends to net profit decreased from 25.78% in 2005-06 to 20.54% in 2006-07.

8. Banks are considering levying a charge of Rs 50 on high-value cheques, while making local payments through real time gross settlement (RTGS) free.

9. Standard Chartered Bank is set to become the third foreign player to enter the Indian retail stock brokerage business by buying a 49 per cent stake in UTI Securities for Rs 140-150

10. RBI has come down heavily on banks authorised to import gold for tying up with non-nominated banks, co-operative banks and non-banking finance companies for gold retailing.

Tides of 12.05.2007

1. SBI, Hyderabad, has signed a MOU with Heritage Foods (India) Ltd to disburse Rs 100 crs for various needs of the dairy sector. SBI would offer term loansto farmers for purchase of animals, construction of shed, purchase of milking machine, chaff cutter and development of fodder plot. The finance would also be extended to the entire value chain of milch animals, bulk coolers, processing centres and marketing outlets. Further, SBI also sanctioned cash credit loans to agents of Heritage Foods for onward financing to dairy farmers. Besides acting as a facilitator to identify farmers, Heritage Foods would provide veterinary services, including artificial insemination, treatment, vaccination and post-mortem.

2. ATMs may be more than cash dispensing machines. NCR Corporation, maker of ATMs, has come up with models that can help bank customers make bill payments, buy airline, railway or cinema tickets, print passbooks and renew their driving licence. NCR is already in the process of deploying or evaluating such systems for banks. It will trim costs, generate revenue and hold customers in the future.

3. Oriental Bank of Commerce proposes to enhance its exposure in tea advances. In 2006-07, their tea advance amounted to Rs 40 crs, which we would like to raise to Rs 100 crs in 2007-08, for the Eastern region covering large parts of West Bengal, Sikkim and the North-East. The bank will open more branches in the north-eastern region in the current fiscal. Right now, there are only four branches, all in Assam (two in Guwahati and one each in Jorhat and Tinsukia). The plan is to open two more branches in Assam, at Dibrugarh and Nowgaon, and one each in Shillong (Meghalaya) and Agartala (Tripura).

4. While most banks plan expansion of branch network for better reach, State Bank of Bikaner and Jaipur, after consolidating its various processes, is trying to hive off back-office functions from core banking activities. The bank has a network of 844 branches, all of which have been brought under the core banking solutions platform.

5. In view of the vibrant financial market, India tops the list of priority countries in the global strategy of financial services major Citigroup, according to Mr Robert A. Annibale, Global Director of Microfinance. The potential of financial market is very huge in India where the markets are new and financial systems are vibrant. India and Mexico are very important for the bank.There was enormous opportunity for rural credit besides savings and insurance in India.

6. IDBI has relaunched its 500-day fixed deposit scheme under the IDBI Suvidha Plus Fixed Deposit (ISPFD) at a higher rate of interest of 9.5% per annum. The initial rate of interest was at 8.25%. It has also increased the rate of interest on its existing 360-day ISPFD scheme and the five-year IDBI Suvidha Tax Savings FD (ISTFD) by 50 basis points to 9.5% per annum, all effective May 7.

7. Indian companies raised a little over $3 billion equivalent to about Rs 13,000 crore through external commercial borrowings (ECBs) in February 2007, according to figures provided by the RBI. About 86 companies raised money abroad during the month. In January 2007, 81 companies raised about $1.29 billion.

8. South Indian Bank has decided to introduce a performance-based incentive scheme for all its staff members. The bank has formed a committee of the board to implement the scheme.

9. Shreyas, Canara Bank's house magazine, has been awarded the first prize in the national house magazine contest-2004 organised by the Press Club, Thiruvananthapuram.

10. The Indian Bank Global Debit MasterCard is an unembossed signature-based card. This is the bank's second debit card - the first was the Maestro card launched last year.

Tides of 10.05 2007

1. To help banks fund infrastructure, the RBI's latest Monetary Policy has allowed them to transact in `single entity credit default swaps'. However, financial innovation can increase the complexity of risk management. The focus of the policy should, thus, be on improving the quality of shock absorbers in the system.

2. India was the leading remittance receiving country in the world last year and received $26.9 bn from expatriate Indians. The growing strength of the rupee vis-à-vis the dollar has not affected the inflow of remittances into the country to any considerable extent. Most of the remittances come for consumption expenditure and there is no way NRIs can hold back these despatches and they form a vital and assured stream of foreign exchange inflow. India, which recorded a 1% growth in remittances from $23.4 bn in the earlier year, is likely to maintain its leading position this year as well.

3. Customers in need of financial advice can now talk to Mr Mani, the virtual financial wizard on the new Web portal (www. money4you.in) launched by Indian Banks' Association (IBA) in collaboration with MasterCard Worldwide and India Cards Council.Mr H.N. Sinor, Chief Executive, IBA, unveiled the Web-based consumer education initiative - Financial Know-How. Banks are growing at a rapid pace and it is essential to be open and transparent. We should not take advantage of the gullibility of the customers," said Mr Sinor. The objective of the initiative is to empower the average person with financial information and guidance to make informed decisions. The portal will help understand credit, choosing and using a card, besides security aspects.

4. Centurion Bank of Punjab has opened its first full-fledged branch in Vijayawada. Vijayawada is witnessing an explosive growth. The Bank is committed to reach each and every part of the city.

5. Citibank and SKS Microfinance Pvt Ltd have tied up to launch a Rs 180-crs programme to extend micro credit in rural areas. As per the tie-up, each individual loan generated by SKS would be purchased by Citibank, which shares credit risk in the transaction. The deal would add 2.5 lakh clients to our existing clientele of 6.5 lakh. This is the single largest investment in micro-finance by a global playe. The programme would deliver loans ranging from Rs 5,000 to Rs 20,000 in over 7,000 un-banked villages in the country where SKS was present through its 49 branches.

6. Canara Bank, the country’s third largest bank, has set its sights on mid-sized Dena Bank and has appointed Ernst & Young to explore the possibility of the deal. This sets into motion the government’s move to introduce consolidation among public sector banks. Sources close to the development said the chairmen of both banks would meet shortly, after which the matter would be taken up by the respective boards and employees would be consulted. After the merger, the government holding in the new entity is likely to come down to about 65%, depending on the swap ratio. The deal is most likely to be a cashless transaction. The government is in favour of “voluntary” consolidation of state-run banks to create mega banking institutions to counter foreign competition.

7. State Bank of India's local headoffice at Chennai has signed a memorandum of understanding (MoU) with Hyderabad-based Heritage Foods (India) Ltd for financing various activities under the dairy sector.

8. RBI has asked old private sector banks to scout for long-term partners to help them achieve their banking objectives rather than just look for financial investors.

9. RBI has put on hold all new accounts of private banks to conduct government business. This follows dissatisfaction expressed by the Centre on the conduct of government business by private financial institutions. Sources explained that private sector banks are profit-oriented and not interested in increasing the reach of these services to far-flung areas. Government business includes collection and payments of funds which was earlier handled as a retail business by the RBI.

10. ICICI Bank plans to hire Goldman Sachs and Merrill Lynch to help sell about $5 bn of stock, the largest share sale by an Indian company. ICICI Bank may appoint the New York-based securities firms as early as next week to sell shares overseas.

11. Development Credit Bank, promoted by The Aga Khan Fund for Economic Development (Akfed), is exploring the option of ADR/GDR along with other plans to raise Rs 275 crs capital to skirt the recent diktat by the SEBI.

Tides of 9.05.2007

1.Syndicate Bank reported a 33.5% increase in net profit for the financial year 2006-07 at Rs 716 crs. The bank's board has recommended a final dividend of 13% for the financial year 2006-07. This would take the total dividend for the year to 28% inclusive of the interim dividend of 15%. The profits were driven by the 40% gallop in advances. Advances were Rs 52,839 crs against Rs 37,660 crs the previous year. The increase in advances with the rise in yield on assets by 56 bps over FY06 helped the bank report a top line of Rs 6,659 crs against Rs 4,612 crs. Interest income, as a result, rose to Rs 6,040 crs (Rs 4,050 crs).
2. Driven by a strong growth in net interest income, Kotak Mahindra Bank's net profit increased by about 7.55 to Rs 37.3 crs in the fourth quarter ended March 31, 2007, from Rs 34.7 crs in the corresponding year-ago quarter. The profit growth would have been higher but for higher provisions amounting to Rs 31.7 crs in the fourth quarter. Operating profit was more than 50% higher at Rs 95.9 crs (Rs 62 crs). The net interest income increased to Rs 204.7 crs (Rs 116.9 crs) while other income rose to Rs 87.5 crs (Rs 76.5 crs). Net interest margin for the quarter was around 4.5%. Total income increased to Rs 521.07 crs (Rs 293.45 crs).
3. RBI has asked non-banking financial institutions (NBFCs) not to grant any loan, or non-fund based facility to its directors, their relatives or to any firm in which any of its directors have interest to obviate conflict of interest in lending operations. This forms part of the corporate governance guidelines issued by the RBI to NBFCs.
4. Standard Chartered Bank is seeing a jump in the transactions taking place through the electronic mode. In 2004, around 45% of the transactions took place through the electronic mode while around 56% were done manually. In 2006, the number has jumped with 67% of the transactions taking place electronically and just 33% being put through the manual route. While the volume of transactions has doubled, the staff or headcount required for them has halved.
5. Buoyed by a strong growth in net interest income and fee-based income, Union Bank of India has posted a 57.24 % increase in net profit at Rs 228 crs for the fourth quarter ended March 31, 2007, against Rs 145 crs for the corresponding quarter of the previous year. Net interest income grew 40.80% to Rs 842 crs (Rs 598 crs). The net interest margin in the quarter increased to 3.52% (2.80%). Non - interest income increased to Rs 242 crore (Rs 174 crs). Total income went up 33.85% to Rs 2,337 crs (Rs 1,746 crs).

Tides of 7.05.2007

1. The Andhra Pradesh Grameena Vikas Bank (APGVB), the largest regional rural bank (RRB) in the country sponsored by SBI , has posted Rs 15.49-crs net profit in 2006-07, the first year of operation after its formation.

2. ICICI Prudential Life Insurance has launched a specialised course in management and insurance - Post Graduate Programme in Management and Insurance. This is a first of its kind programme in India that offers intensive training in these fields.

3. Allahabad Bank has posted a net profit of Rs 125.74 crs in the fourth quarter of fiscal 2006-07 as against Rs 150.5 crs in Q4 of the previous year. The bank's total business has crossed the Rs 1-lakh-crore-mark during the financial year ended March 31, 2007.Income from non-fund/non-interest business increased to Rs 132.56 crs during the quarter compared with Rs 89.62 crs during the corresponding quarter last year.

4. The rupee has been witnessing significant appreciation against the US dollar. How should the corporates react to the accentuated currency movements? "Importers are better advised to wait for any hedging strategy since they may actually end up getting a better exchange rate in the spot market with an appreciating rupee," says Mr Ravi Trivedy, ED, Business Advisory, KPMG Advisory Services. His counsel to exporters is to book a forward cover and benefit from exchange rate and interest rate differentials between the rupee and the US dollar.

5. RBI has asked urban co-operative banks not to deal with 918 non-banking companies in Bihar, which are listed as "defaulted companies". The directive follows an order issued by the Patna High Court.

6. City Union Bank plans to raise capital through the issue of up to 68 lakh equity shares on preferential basis (in exchange for cash), according to a Bombay Stock Exchange announcement.

7. Mumbai's famed dabbawallas will now offer financial services with hot and fresh meals. Corporation Bank has tied up with Mumbai's dabbawallas to source clients for offering banking services. The dabbawallas will act as business facilitators for distributing mailers and will also collect the filled-up application forms for opening new deposit accounts. There are around 5,000 dabbawallas in Mumbai feeding a client base of around 1.25 lakh office goers and 50,000 students every day. These dabbawallas will now not only deliver food, but also essential banking services. We plan to tap their huge client base. The remuneration to the dabbawallas will be based on a flat-fee structure. They will get Rs 2 per form for distribution and Rs 5 per form for collection of the completed application forms. There will be designated dabbawalla officials who will attest the feedback reports before passing them on to the marketing team of the bank.

8. RBI has decided not to accept its own study group's recommendation to charge paper-based transactions. An Internal Study Group on Migration from Paper Based Funds Movement to Electronic Funds Transfer had recommended a charge on paper-based transactions to be borne by the bank customers in a bid to shift to electronic funds transfer.

9. Forex reserves have gone up $254 mn to $204.135 bn for the week-ended April 27 on FII inflows and strengthening of the non-dollar currencies against the greenback.

10. Pushed to searching for new business segments, Indian information technology companies such as Infosys, i-flex, and Infrasoft are working on core banking solutions for Islamic banking. The companies will have to invest $7 billion in software writing and technology by 2008. Infosys Technologies is developing an Islamic Banking solution supporting Shariah compliant products and services. Infrasoft Technologies has 35-40 experts working on Shariah projects, while i-flex solutions has created, `Flexcube for Islamic banking'.

11. PNB has increased interest rates on home loans above Rs 20 lakh by 100 bps. The total home loan portfolio of the bank was about Rs 7,000 crs as on March 31.

12. RBI and the State Bank of Pakistan (SBP) have reached an understanding on granting permission for opening two branches of banks from India and Pakistan in each other's country on a reciprocal basis.

13. American Express Bank has targeted Bangalore for growing its premium credit card business. It has estimated that the Karnataka had about 44,000 affluent individuals, those with liquid assets in excess of $1,00,000.

14. City Union Bank has entered into an `e-remittance' service agreement with Qatar-headquartered Doha Bank QSC. The agreement envisages electronic remittance of funds by NRI clients of CUB (in West Asian countries) to designated centres in India.

15. Bank of Baroda, which is to host the bankers' conference, Bancon 2007, plans to make it a value-added event for bankers. The Indian Banks' Association and BoB sources are working on this mega event, slated to take place at Mumbai.

Tides of 3.05.2007

1. Canara Bank's board has recommended a 70% dividend for the financial year 2006-07 after reporting a profit of Rs 1,420.81 crs, a 6% increase over Rs 1,343.22 crs in the previous year. The record profits are despite the high provisions of Rs 1,491.66 crs. The bank's provisions for non-performing assets were Rs 457 crs and depreciation of investments Rs 549 crs.The bank was able to absorb these provisions on account of the high operating profits. Operating profits were Rs 2,912.47 crs (Rs 2,549.93 crs). The improved performance was propelled by the better gross income. Gross income was at Rs 12,815.51 crs (Rs 10,027.08 crs). Interest income stood at Rs 11,364.56 crs (Rs 8,711.51 crs).

2. American International Group (AIG) is stepping into consumer finance in a big way, a decision that is prompting it to explore multiple growth strategies. The group, which has acquired controlling stake in the Chennai-based Vivek Hire Purchase & Leasing and entered into a deal involving Weizmann Homes, may even look at taking over other existing players in the financial services space. It is to launch consumer finance and home loan products and follow these up with auto loans and credit cards.

3. Now, housing loans up to Rs 20 lakh and education loan up to Rs 10 lakh for domestic education and up to Rs 20 lakh for overseas education will be treated as priority sector advances. Earlier housing loans of Rs 15 lakh qualified as priority sector lending. An RBI circular has also defined direct finance to corporates for agriculture and allied activity of up to Rs 1 crore as priority sector lending by banks.

4. Indian venture capital funds can now invest in equity and equity-linked instruments of offshore venture capital undertakings, subject to an overall limit of $500 mn.

5. Public sector banks have posted a 33% growth in profits in fiscal 2006-07. Twenty-two public sector banks, including IDBI, have reported profits of about Rs 11,539 crs in a year marked by robust economic growth and resultant loan expansion. The results of six other banks, including SBI and PNB, are awaited. In the fiscal 2005-06, all public sector banks had seen their profits grow 13 % to about Rs 21,500 crs.

6. The demand and disbursement of education loans have been growing significantly in Andhra Pradesh and leading banks are expecting the segment to grow further this year. The education finance is one of the top priority areas and the growth in demand has been significant over the last two years for State Bank of Hyderabad.

7. The Bombay High Court has ruled that LIC has to honour claims made by lenders, that is banks, non-banking finance companies (NBFCs) and financial institutions, if an LIC policyholder defaults in repaying the loan to the lender. Also, LIC cannot insist that lending institutions furnish a declaration stating that they are not in the business of trading in life insurance policies.For obtaining a loan, often, a policyholder may mortgage insurance policy(s) with banks and NBFCs by assigning (read transfer the rights/benefits) to the lender.

8. SBI Life Insurance is aiming big on bancassurance as a distribution channel for its future growth.The company is aiming 300% profit growth in the current fiscal after registering 88% rise in profit in 2006-07 at Rs 3.83 crs. In addition to 125 full service branches of SBI Life, the company has access to 14,500-branch net work of SBI.

9. The parliamentary committee on Welfare of Scheduled Castes and Scheduled Tribes has asked the government to make it mandatory for foreign banks to lend to agriculture sector and weaker sections of the society as part of the priority sector lending target. Guidelines should be issued to direct foreign banks also for lending under agricultural advances and to weaker sections. Presently, domestic banks are required to allocate 10%of their advances for priority sector lending to weaker sections and 18% to the agriculture sector. Foreign banks are exempt from any such obligation. They are, however, required to allocate 12 % of their funds under priority sector lending to companies for export promotion, from which domestic banks are exempt.

Tides of 2.05.2007

1. The volume of financial services will be three times bigger than the volume of ITeS services in India over next 15 years and the employment generation would far exceed the BPO industry. This is because of the advent of significant portion of International Financial Services (IFS) to India and surge in volume of domestic financial services. Already, many global financial firms are mulling shifting of jobs to India. This would be followed by the arrival of internationally known financial firms.

2. The broad objectives of Monetary Policy in India relate to maintaining price stability and ensuring adequate credit expansion to foster growth. But the relative emphasis on these objectives has naturally differed depending on the socio-economic requirements and priorities during the course of the country's growth process. Monetary Policy has to, therefore, be evaluated in an integrated framework in terms of the inter-relationship among money, output and prices.

3. SBH will be organising a `housing loan mela' from May 2 to May 31 at Zoroastrian Club, Secunderabad here. During the period, the bank would offer waiver of processing charges, 50 bps concession in the rate of interest for loans up to and including five years of tenure and 25 bps concession in the rate of interest for loans above five years and up to 20 years. Further, a free personal accident insurance policy of Rs 1 lakh for the first year of the loan would also be offered.

4. Bank of Baroda plans to open another 15 SME loan factories this year. It inaugurated the 16th SME loan factory, at Coimbatore.

5. The capital adequacy of banks will fall by 50 bps in 2007-08 and by as much as 75 bps each in the second and third year, after adopting the new capital adequacy norms. There would be a severe strain on capital due to the implementation of Basel II norms, according to bankers. The impact will however be spread over 3 years. The banks will have to adopt the new capital provisioning norms under Basel II with effect from March 2008.

6. In a major relief to banks, the RBI has included direct finance to corporates for agriculture and allied activity of up to Rs 1 crore under priority sector lending against the earlier exposure of Rs 20 lakh. Similarly, home loans up to Rs 20 lakh will also now be classified under priority sector advances against the earlier limit of Rs 15 lakh. The new norms will take immediate effect. The targets for priority sector lending will be linked to adjusted net bank credit (ANBC) or credit equivalent amount of the off-balance sheet exposure, whichever is higher, at end of previous financial year.

7. Vijaya Bank has returned to profitability and registered a net profit of Rs 63.65 crs in the fourth quarter of 2006-08 compared with a net loss of Rs 34.53 crs in the corresponding period last year. The operating profit has also gone up by 20% to Rs 193.25 crs during the same period. The turnaround has been partially made possible by a writeback of Rs 48.3 crs earlier for taxes. The bank also benefited from lower provisioning for NPA and higher interest income on advances, which grew by 48 % to Rs 513 crs.

8. Bank of Maharashtra registered a net profit of Rs 75.27 crs in the fourth quarter ending March 2007, while it registered a loss of Rs 33.41 crs in the same period last year. But its net profit grew more than four times to Rs 271.84 crs in 2006-07 compared with Rs 50.79 crs in 2005-06 on the back of robust growth in non-interest income. The board has recommended a dividend of 20% for the year ended March 2007.

9. A severe staff crunch at the branches for managing the front desk operations has compelled the SBI to resume recruitments in the clerical cadre after almost a gap of 20 years. The bank plans to induct about 3,600 persons in unionised category as “Customer Relations Associates”. The bank needs people to interface with customers at the branches. All the young graduate personnel (to be inducted in clerical posts) will be computer savvy and sensitive to the client requirements.

10. The cumulative value of exports rose by 23.88% to $124.6 bn (Rs. 5,63,800 crs) in 2006-07 from $100.6 bn in the previous fiscal. However, the cumulative value of imports grew at a much faster pace by 25% to $181.3 bn (Rs. 8,20,568 crs) from $140.2 bn, according to provisional data for merchandise released by the Directorate General of Commercial Intelligence and Statistics. Crude oil imports were higher by 30% at $57 bn during the year against $44 bn in the previous fiscal. Non-oil imports were valued at $124 bn, which were 25% higher than the level of such imports valued at $99.4 bn.

11. Bharti Airtel chief Sunil Bharti Mittal will join the board of Standard Chartered PLC as an independent director.

12. Till some time ago, a gold credit card was enough to tell the world you've arrived. Now, as rupee-millionaires proliferate in the afterglow of the India growth story, gold is not enough. India's credit card companies are thus thinking platinum - cards that are usually offered by invitation only.

13. The government has clarified that coins of all denomination including 25 paise are acceptable in the country.

14. The number of special economic zones notified in the last 14 months since the SEZ Act came into force in February 2006, has touched the 100-mark.

15. Market regulator SEBI has imposed a fine of Rs 3 crore and Rs 5 crore on national depositories CDSL and NSDL respectively for negligence and lack of compliance in allotment of shares in the initial public offers of many companies between 2003-05.

16. RBI has exempted farmers from submitting 'no due' certificate (NDC) for obtaining loans up to Rs 50,000 from banks.

17. Andhra Bank is planning to set up a bank in Malaysia in partnership with BOB & PNB.The finer points of the joint venture are being worked out. Bank of Baroda would be the majority holder in the JV, with 40%, while Andhra Bank will hold a 25 % stake and PNB, 35%.

Tides of 1.05.2007

1. Dr P.J. Nayak is back at the helm of UTI Bank, rechristened Axis Bank, as whole-time Chairman with full powers. In a strategic move to get round the RBI directive to split the chairman and managing director's post, the UTI Bank board on Monday appointed Dr Nayak as Chairman with none designated as managing director.

2. Karur Vysya Bank has inked an MoU with IDBI Capital Market Services for offering online trading facility and Depository Participation Services. The demat services would be available at KVB from June 1. The bank proposes to initially make this service available through 13 of its major branches and extend it across its 270-plus branch network in a phased manner. The service would be available in 70 to 80 branches in the first year of the roll out. The bank has plans to introduce more such technology-backed products, five to six products were in the pipeline.

3. IDBI Capital Market Services has tied-up with Punjab National Bank, IDBI, Oriental Bank of Commerce and Bank of Rajasthan for offering the online trading facility, but KVB is the first bank in the South with which it has inked the agreement for online trading and Depository Participation Service. "The offer of two products comes as a total solution. Not many banks offer both."

4. SBI Life Insurance Company has announced a 210% growth in new premium income at Rs 2,566.08 crs in the last fiscal.The company, the first among the new life insurance companies to make a profit in 2005-06, will focus on leveraging the brand equity of SBI Group. SBI Life, in which the French company Cardif holds 26% equity, hopes to achieve a 300% growth in new business in the current year.

5. The Dutch multilateral lending agency, FMO, might pick up some equity stake in City Union Bank (CUB). Sources in investment banking circles told Business Line that FMO might invest about Rs 50 crs into the bank. When contacted, officials of the bank refused to confirm or deny this. However, a communication from the bank to the stock exchanges on Monday said that a board meeting is to be convened on Friday to consider "further issue of shares through preferential allotment."

6. Corporation Bank has launched video-conferencing facility between its corporate office and zonal offices. This facility is expected to assist the bank in expediting decision-making process. This will also add to the technology edge of the bank in rendering efficient service.

7. Export Import Bank of India plans to raise about Rs 13,000 crs in 2007-08. Of the total amount, around Rs 6,000 crs will be raised in foreign currency with the rest being in rupees. During 2006-07, the bank had raised Rs 10,621 crs, comprising rupee resources of Rs 6,461 crs and foreign currency resources of $957 mn. Market borrowings as on March 31, 2007 formed 85% of the total resources. The bank's weighted average costs of funds increased to 7.05% in 2006-07 against 6.25% last year.

8. Bank of Baroda plans to have an SME Loan Factory in Coimbatore for centralised processing of SME applications in this region. It would be the bank's 16th SME loan factory in the country.

9. Having recruited 800 persons last year, Union Bank of India is looking at picking up 1,000 this fiscal. The recruitment exercise was aimed at having a mix of people of young people with excellent skill sets. It has also started the `succession plan' exercise. Public sector banks are not practising succession plan in a big way. This bank commenced this exercise a year ago. The bank has, in the first year, deputed 30 youngsters for training at IIM, Bangalore.

10. The OIC (Oriental Bank of Commerce, Indian Bank, Corporation Bank) alliance partners seem to be looking at using the OIC brand for their overseas expansion plans.