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.
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.
