Tides of 31.08.2007

1. There is a Shylock on the prowl in most urban cities, preying on unwary and gullible victims. Numerous middle-class Indians have fallen prey to its usurious ways. With Urban India’s new-found prestige and affinity to hoard and flaunt credit-cards, this tech-savvy 21st century shyster comes in three distinct shades — silver, gold and platinum. Surprisingly, it is still to extend its reach in a big way into Rural India.

2. National Housing Bank (NHB) is planning to invest equity in housing finance corporations engaged in rural housing finance.“While housing finance in the country is growing at a CAGR of 46 per cent, rural finance is not keeping pace with it. It wants to act as a catalyser to promote housing finance for middle-income and poor people.”

3. The Standing Committee on Finance has endorsed the proposal in the State Bank of India (Amendment) Bill, 2006, to bring down the statutorily prescribed minimum shareholding of the Reserve Bank of India (now the Union Government) in SBI to 51 per cent from the current level of 55 per cent.
Currently, the Centre holds 59.73 per cent stake in SBI, which is the country’s largest commercial bank. The Centre had in June this year acquired the entire shareholding of the RBI in SBI.

4. The Prime Minister, Dr Manmohan Singh, today expressed hope of doubling credit flow to the small and medium sector within five years. While giving away the national awards to small and medium enterprises (SMEs) in the Capital on Thursday, Dr Singh said, “I hope we can double the credit flow to this sector within a period of five years. I urge our banks and financial institutions to come forward and support and nurse SMEs, especially through risk and venture capital support.”

5. State Bank of Hyderabad (SBH) has put its public issue plans on hold till December and is awaiting ‘specific roadmap’ on a possible merger with State Bank of India.

6. Fullerton India Credit Company, a non-banking finance company, has launched a marketing programme named ‘Parivaar Laxmi’, which is an incentive-based referral system for housewives. This programme is targeted at the housewives residing in the neighborhood of Fullerton India branches spread across the country. Fullerton India has more than 300 branches spread across 100 locations. This company, which is a fully-owned subsidiary of Fullerton Financial Holdings, Singapore, has 8,000 employees on its rolls. The housewives who are appointed as ‘parivaar laxmis’ refer their friends, neighbours and relatives in their social network and pass on the leads as people who are interested in loans and insurance to the neighborhood Fullerton India branch.

7. Andhra Bank is very aggressive on the ‘kiddy bank’ account. Departing from the usual ‘Customer Meet’, Andhra Bank has this year commenced a month-long ‘AB Celebrations 2007’ drive to create awareness about the various products and services offered.

8. Infrastructure Development Finance Company Ltd (IDFC) plans to raise Rs 12,000-Rs 14,000 crore of debt from the domestic markets this fiscal to fund infrastructure projects in the country.

9. Banks are keen on increasing their exposure to regional cinema with more and more big-banner Bollywood filmmakers producing such movies and the kind of growth potential they see in this sector, say media analysts. Among regional movies, South Indian and Bhojpuri movies seem to be the favourites of these filmmakers.

10. The United Forum of Bank Unions has called for a one-day strike on September 12 in order to press for the implementation of the memorandum of understanding signed with Indian Banks’ Association.

11. YES Bank is looking at using mobile phone as a platform to enhance the reach and bring down the cost of micro-finance.
The bank along with Accion, the US based micro-finance agency, plans to tie up with a global software provider in order to find a software solution for the same.

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Tides of 29.08.2007

1. Mr S.S. Jawahar, launched ‘Canara Gramin Vikas Vahini’ scheme at Thottiyapatti village, 40 km West of Madurai recently, in an effort to take banking services to doorsteps in remote villages, under a nationwide scheme initiated in June. Executed through a van service equipped with public address system, the branch manager travelling in the van has the authority to sanction spot loans for eligible candidates, who could come and collect the amount the next day at a nearest branch.
2. Faced with the possibility of tightening liquidity, a clutch of banks has begun pushing for a rollback of the Cash Reserve Ratio (CRR) hike.The Reserve Bank of India hiked the CRR to 7 per cent from August 6 and mopped up Rs 15,000 crore of liquidity.The CRR hike had come at a time when credit offtake growth had slowed down to 22 per cent, as against the previous year’s 31 per cent.Bankers hope for a reversal in the current situation with better farm sector offtake. However, the fear is that the high CRR would impose a pressure on lending rates. This is partly because CRR balances earn no interest.
3. More than 5,000 bank employees and officers of the All India Bank Employees’ Association (AIBEA) and All India Bank officers’ Association (AIBOA) would stage dharna before Parliament on August 31 to highlight their charter of demands for banking industry and aam admi.Both AIBEA and AIBOA have launched a national campaign on various policy issues affecting the banking industry.
4. Commercial banks appointed by the RBI to deal in gold are pitching for an inter-bank gold market.“We are seeking some reforms to establish a gold industry for which an application will be made to the RBI in 3-4 weeks”, said Mr Rajan Venkatesh, Chairman of Indian Bullion Bankers’ Association.Although spot trading in the yellow metal is permitted, there is no developed inter-bank market. Regulatory conditions are not conducive for depth in these markets, according to chief of a commercial bank.
5. The proposals of ICICI Bank and State Bank of India to float holding companies for their insurance and asset management business may face regulatory hurdles, going by the Reserve Bank of India’s views expressed in a discussion paper on holding companies released on Monday.According to the discussion paper, the intermediate holding company model (which is being proposed by both the banks) will not come under the RBI’s regulatory supervisions as they are not required to be registered as non-baking finance companies.In the case of ICICI, its application for creating a holding company — ICICI Financial Services — is pending with RBI, though it has already been cleared by IRDA, FIPB, and the Ministry of Finance.
6. The Reserve Bank of India has sanctioned the scheme of amalgamation of Lord Krishna Bank Ltd with Centurion Bank of Punjab Ltd, said a press release from RBI.The scheme will come into force with effect from August 29. All the branches of Lord Krishna Bank will function as branches of Centurion Bank of Punjab effective August 29.
7. Punjab National Bank is working out a programme to cut its non-performing assets, which is currently among the highest in PSU banks.Dr K.C. Chakrabarty, who took over as Chairman and Managing Director of the bank in June, has given top priority to this programme, which he described as “ NPA administration.” Currently, over 3.81 per cent of the bank’s advances are bad loans or NPAs. Dr Chakrabarty’s aim is to bring it down to below two per cent at the earliest. For the quarter ended June 30, the bank had reported fresh NPAs of Rs 600 crore. This is over and above the Rs 2,000-crore slippage the bank had in the last fiscal. PNB had made Rs 137.87-crore provisions for NPAs in the first quarter.Dr Chakarabarty told Business Line “lots of NPAs were added last year. We have expanded fast but without adequate capacity. From a 15 per cent credit growth suddenly if you grow at 30 per cent, you have to examine the system.
8. Enthused by response to the ‘Corp Compassion’ scheme where the Corporation Bank donates Rs 10 to underprivileged children for every savings account opened, the bank has decided to extend it to Current Accounts opened during the next five weeks starting Monday.

Tides of 26.08.2007

1. State Bank of Patiala (SBP) has launched ‘SBP-Smart Deposit Scheme’ (term deposit and special term deposit) for a maturity period of 455 days. The deposits would provide an interest of 9.5 per cent per annum for general public.

2. State Bank of India, the country’s largest commercial bank, has kicked off the consolidation process with its associate banks. SBI has decided to merge State Bank of Saurashtra, a wholly owned associate bank, with itself. The boards of both SBI and State Bank of Saurashtra have given an in-principle approval to the merger proposal.

3.The country’s forex reserves fell by $2.551 billion to $226.445 billion for the seven days ended August 17, dipping for the second consecutive week.This was due both to FII outflows resulting from the US sub-prime loan crisis, as well as the RBI's recent curbs on external commercial borrowings. Market participants also attribute the fall in reserves to the revaluation of other currency assets.

4. Indian companies have borrowed about $14.97 billion through external commercial borrowing (ECB) and foreign currency convertible bonds (FCCB) within a span of five months from January to May 2007.Analysts feel that the huge borrowing through ECB route was mainly due to the high rates of interest in the domestic market. “The interest rates for borrowing through ECB/FCCB was about two-three per cent lower than that offered by the domestic market.”

5. LIC has launched two unit linked insurance plans - Profit Plus and Fortune Plus. Both are unit linked endowment plans, which combine insurance with market related returns.

6. The Kerala Government and the Centre in association with the United India Insurance Company Ltd will jointly launch a health and personal accident insurance policy for the “Tsunami affected elow poverty line (BPL).

7. The ICICI group is looking to hire about 20,000 people a year through direct employment for the next few years. The three back office hubs of ICICI Bank, in Bhubaneshwar, Hyderabad and Ahmedabad, have about 20,000-30,000 people at each location. The bank sees an attrition rate of 15-16%.One way of addressing the problem of attrition is to create and increase the pool of people with the right skill sets. For this, ICICI Bank has tied up with educational institutions such as NIIT, ICFAI and Manipal University for integrating the bank’s training modules as part of the curriculum.

8. The Reserve Bank of India today permitted foreign investment in ICICI Bank shares, as the share of Foreign Institutional Investors (FIIs) has gone down below the trigger limit of 74 per cent of its paid-up capital.

9. The share of credit flow to small scale industries from public sector banks have been steadily declining since early nineties. Lending to SSI sector accounted for 16.1 per cent of bank credit in 1991 and has declined to 8.5 per cent in 2006.

10. The Union Finance Minister, Mr P. Chidambaram, has assured the Lok Sabha that he would soon bring a Bill to regulate the various payment systems in the country, including those operated by non-banks such as card companies.

11. Giesecke & Devrient GmbH, a German company specialising in providing international technology services, is set to expand its product range for currency processing systems in India by introducing coin handling systems.

12. Small and marginal farmers availing agriculture loans up to Rs 50,000 need not pay any service charge and need not deposit land documents at bank branches. These are some of the recommendations of the group set up by the Reserve Bank of India.

13. In a notification issued to banks, the Reserve Bank of India said: “Banks and financial institutions are advised to invariably furnish a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.”
The condition would apply for all loans across the board.

Tides of 22.08.2007

1. The Finance Ministry will soon initiate steps to catalogue the activities, both legislative and administrative, that need to be undertaken to make Mumbai an International Financial Centre (IFC).The recommendations in the report of the Government-appointed High Powered Expert Committee (HPEC) on ‘Making Mumbai an International Financial Centre’ would form the basis for such an exercise.

2. Canara Bank has launched two new schemes for high net worth individuals. A bank release said that the schemes branded as SB Gold (savings bank account) and Can-Premium (current Account) come with value added services that include free debit/credit cards, Internet/telebanking facilities, issue of demand drafts at concessional charges and concessional electronics funds transfer facilities and name-printed cheque books. To avail themselves of the services, customers would nee d to hold an average monthly balance of Rs one lakh in their operative accounts.

3. Union Bank of India has announced cuts in rates for new home and car loans only for August and September in Kerala to coincide with the Onam festival season. The interest rate on home loans has been reduced by one per cent. The prevailing rates are 9.25 per cent for loans up to five years; 9.50 per cent for 10 years; and 9.75 per cent for above 10 years.The bank has also reduced interest rate on car loans by half percent during the festival season. The offer is applicable only in the 147 branches across the State of Kerala.

4. Central Bank of India made its debut on the Bombay Stock Exchange at Rs 130.10, at a premium of 27.54 per cent, against the offer price of Rs 102. It touched a high of Rs 133.25 and a low of Rs 114 on the BSE before closing at Rs 115.4. Total volumes were 2,43,85,904.

5. Led by roads and ports, power and telecom sectors, credit disbursement by banks to the infrastructure sector has grown in the last two years at 43 per cent and 36 per cent, respectively, according to industry chamber Assocham. The chamber conducted a study covering financial years 2000 to 2007 on sectors such as iron and steel, construction, petroleum, power, telecommunication, roads and ports.

6. Bank of India is looking at revamping its credit card business and is considering the options of having it either in-house or floating a subsidiary or roping in another bank to enhance its business from this segment.
The bank’s credit card base currently is about 7 lakhs. The bank has appointed KPMG as the consultant to conduct a study on the same.

7. ICICI Bank has signed an agreement with Export-Import Bank of Korea for a line of credit of $200 million. ICICI Bank would use the funds to meet the foreign currency requirements of corporates having business connections with Korean companies. These corporates could be Indian firms or those from neighbouring countries. This is the first time that Korea Exim Bank has extended such a line of credit to any bank. This two-step loan is not specifically tied to any sector and can be used across any sector. Sectors that are likely to benefit from this line of credit include consumer durables, automobile, power and shipping.

8. The Indian Institute of Banking and Finance (IIBF) has launched Diploma in Banking and Finance which is open to all graduates in distant mode.
Till now, the content of the course is being extended to the members of the institute (employees of the banks) as JAIIB. In view of the needs of the industry, it is now extending the programme as DBF to graduates in any discipline. The institute has tied up with Manipal University for exam delivery and organising virtual lessons. In addition, its own faculty will also conduct live classes via Internet. The total fee payable is Rs 6,500 (Rs 5,000 without access to virtual classes).

9. The Lok Sabha on Monday passed a Bill to replace the Ordinance promulgated on June 21 to facilitate the Centre’s buyout of the Reserve Bank of India’s shareholding in SBI.On June 29, the Centre acquired 59.73 per cent stake of RBI against total payment of Rs 35,531.33 crore drawn from the Consolidated Fund of India.

10. SBI has chalked out an innovative strategy to widen its network and reach out to the remotest villages of India. It has decided to tie up with post offices for this purpose. SBI is tying up with post offices to give credit to remotest villages of India. With over 9,000 branches, SBI has the largest bank branch network in the country. SBI has already launched pilot projects in Maharashtra in association with postal department.

11. Tamilnad Mercantile Bank (TMB) has sanctioned loans to the tune of Rs 10.28 crore to 661 self-help groups, under a specially arranged priority sector loan sanction camps through all its 189 branches, on the eve of Independence Day.

Tides of 20.08.2007

1. The Finance Ministry has recommended to the Commerce and Industry Ministry that the foreign investment cap on credit information companies be placed at 49 per cent.Currently, there is no specific policy on foreign investments in credit information companies.The proposed cap would include FDI and foreign portfolio investment through FIIs.

2. Federal Bank has formulated a new scheme for financing delivery-based futures trade in agricultural commodities. The bank was getting ready to finance delivery-based trade in all agricultural commodities throughout the country in the days to come. Under this scheme, customers can get loan up to 85 per cent of the futures selling price. Besides, the bank will also fund both the initial margin and the daily mark-to-market (MTM).

3. Despite the spread of banking in the modern context, changes in the financial sector and the rising awareness about the credit delivery system among rural household, the number of moneylenders and the quantum lent by them has registered a substantial jump in the last decade.“The dependence on moneylenders has not decreased. It has, on the other hand, increased in several rural regions,” notes an RBI study.Reports from the 11 regional offices of the RBI show that the number of registered moneylenders increased from 12,601 to 19,627 between 1995 and 2006. Anecdotal evidence suggests a corresponding rise in the unregistered moneylenders.

4. Realising that loan disbursed under Indira Awaaz Yojana scheme for rural housing has not been adequate to build a decent housing facility at present, given the rise in the price of construction materials, Indian Overseas Bank has come up with a scheme to extend housing loan facility up to a maximum of Rs 20,000 for such beneficiaries at 4 per cent interest rate.
The beneficiaries, instead of approaching money lenders and paying a higher rate of interest to complete the construction work, should make use of them.

5. Barring any objections from the Insurance Regulatory and Development Authority in the next 10 days, National Insurance will launch an insurance product to cover the risk faulty title.
The product was filed for the regulator’s approval about 20 days ago and, under the ‘file-and-use’ policy of IRDA, the insurer may launch the product after 30 days after filing, provided there is no query or objection.The product, common in many countries but launched in India for the first time, will cover risk of faulty or litigated title such as those arising out of suits, disputes of transfer and forgery.

6. Canara Bank will look into the possibility of having tie-ups with renowned institutes for marketing the products created by rural artisans at the artisan training institutes run by the bank.Canara Bank Centenary Rural Development Trust has through its 14 institutes in the country trained more than 50,000 people in traditional arts, rural development activities, and information technology. Of the 14 institutes, training in traditional arts is given at Jogaradoddi and Miyyar in Karnataka and Karaikudi in Tamil Nadu.

7. UCO Bank, which is sitting on an Rs 1,285-crore pile of non-performing assets, will put up about Rs 500 crore of the stressed assets next month for bidding by various asset reconstruction companies (ARCs).Two General Managers and about 300 of the bank’s staff had been put on the task of making recoveries.About Rs 300 crore of the bad loan the bank has on its books today were old agricultural bad loans that have got reclassified as NPAs, after the two-year moratorium from 2004-05. Some NPAs also resulted from fraudulent housing loans. All the other NPAs are fully backed by securities. The bank has 48 accounts of ‘big ticket’ (over Rs 5 crore) NPAs amounting to a little over Rs 500 crore.

8. Reports of phishing targeted at customers of banks appear to be on the rise. Websense Security Labs, in a statement released recently , said it had received reports of such attacks from customers of AXIS Bank. The Lab went on to say that it found a malware in the Web site of Syndicate Bank. A phishing site hosted in Malaysia, targeting AXIS Bank customers, asking the users (through a spoofed email) to renew certain services and claiming that failure to do so would result in suspension or deletion of the account. The e-mail provided a link to a malicious site that attempted to capture the personal and account information.

9. The Technical Group set up by the RBI to ‘Review the Legislation on Money Lending’ has recommended a model legislation on Money Lenders and Accredited Loan Providers (by incorporating the best features of the domestic and International legislation) for adoption, particularly in those States that do not have a comprehensive legislation in place at present.
Stressing the need for examining the relevance of the legislations (passed several decades ago), the Group has recommended some modifications to the existing legislations such as quick, informal and easy dispute resolution mechanism for better enforcement; and legitimising money lending activity in States that have no such provision.It noted with concern the absence of effective enforcement of the legislation in many States.

10. A high-level committee under the chairmanship of former chief economist of the International Monetary Fund (IMF), Prof. Raghuram G. Rajan, to map out a comprehensive agenda for reform of the country’s financial sector has been set by the Planning Commission today.The 12-member committee’s remit include, among others, to identify the emerging challenges in meeting the financing needs of the Indian economy in the coming decade and the real sector reforms that would permit those needs to be more easily met by the financial sector.
It would also examine the performance of various segments of the financial sector and identify changes that would meet the needs of the real sector, identify changes in the regulatory and the supervisory infrastructures that could better allow the financial sector to play its role while ensuring that risks are contained.The terms of reference also covers identifying changes in other areas of the economy including the conduct of monetary and fiscal policy and the operation of the legal system and the educational system that would help the financial sector function more effectively.The committee would submit its report by end-March 2008. Other members of the panel include the Director General of the NCAER, Dr. Suman Berry, Mr. Uday Kotak of Kotak Mahindra Bank, Mr Rajeev Lall of IDFC, Mr Vijay Mahajan, Chairman Basix, Mr Zia Modi, Senior Partner, AZB Partners, Mr. O.P.Bhatt, State Bank of India, Mr K.V.Kamath ICICI Bank, Ms Chitra Ramakrishna, Deputy MD, National Stock Exchange, Mr R. Ravimohan, Crisil, Mr J.R.Varma, Indian Institute of Management, Ahmadabad .

Tides of 17.08.2007

1. SBI Funds Management Pvt Ltd, the investment managers for SBI Mutual Fund, has tied up with Dena Bank to enhance the fund’s reach. The tie up with Dena Bank is prestigious as its quality products would now be available to the bank’s customers across the country.

2. The Securities and Exchange Board of India (SEBI) is contemplating the creation of a self-regulatory mechanism for regulating the financial advisors.At present, financial advice was being rendered by many agencies such as brokerage and media houses. “The damage can be severe if this advice is not done in a professional manner.”

3. There is a need for providing low-cost financial advice in the country, according to Mr M. Damodaran, Chairman, Securities & Exchange Board of India (SEBI).In his second convocation address at the Institute of Insurance and Risk Management (IIRM) here on Thursday, Mr Damodaran said SEBI was working on developing low-cost financial advice in association with the Financial Planning Standards Board.“Financial intermediation is not an easy task. Earlier, advisors had no basic understanding of the products they sold. But now things have changed. The regulator alone cannot ensure the sale of the right product to the right person.

4. Banks in India and other Asia-Pacific countries must improve skills of their staff to curb money laundering activities, as training programmes are unsophisticated and the laws outdated, consultancy firm KPMG has said in a report.“Respondents across the Asia-Pacific region have said that training in many parts are relatively unsophisticated, reflecting outdated legislation and lack of regulatory pressures,” the global study done by KPMG Forensic said.The study, conducted among 224 banks from 55 countries, found a marked shift in the attitude of senior management in India as well as Asia-Pacific region with increasing interest and involvement of top officials in anti-money laundering (AML) activities.

5. The Centurion Bank of Punjab’s foreign exchange services (FES) division plans to expand its geographical presence to 106 locations in the country by end-March 2008. This division, which offers travel-related foreign exchange services, is currently working out of 65 locations from 23 different cities. Last year, this division handled about $1.2 billion equivalent of forex.

6. Karur Vysya Bank has introduced the ‘KVB Freedom SB Account’ with multi-city features for its savings bank customers. Largely targeted at high net worth individuals, this product offers freebies such as 100 cheque leaves a year, mobile and Net banking, on par cheques (payable at all branches) up to a maximum of Rs 15 lakh a month, free cash remittance up to Rs 75,000 a month and cash withdrawal up to Rs 25,000 a day at any branch. Customers would have to maintain a minimum monthly average balance of Rs 10,000.

7. To coincide with the Malayalam New Year Chingam 1 on Friday, the Aluva-based Federal Bank is to roll out its new product – Federal Bank Pure Gold – at a function to be held at Federal Towers. The bank would initially sell imported gold bullions of 5 gm, 8 gm and 20 gm at its 53 select branches in Kerala. Soon it will introduce other denominations and expand the sale network in the other States. The bullions, made in Switzerland, will be of 24 carat with 99.99 per cent purity, which is the highest quality standard possible in gold. The products will come in tamper proof packages together with an Assay Certificate of the Swiss Refinery.

Tides of 15.08.2007

1. Carry your ATM with you. All it weighs is 40 kg and you can be safe about the money and can show your clients how easy and safe it is. This is one of the products that have been developed by the Pune-based Axis Software Pvt Ltd.This pixie-sized ATMs have found clients in Africa. It is as similar to any other ATM, except its size, and carries out all the normal functions. It also has a GSM modem, automatic checker and a GPRS connection so that the user does not feel lost at any time. He said the company is also in talks with banks in the domestic market for these ATMs and it is expected to begin its installation by year-end.As part of its client base in Africa, Axis has also won an $5.5-million order from the Commonwealth Business Council, for deployment of ATMs in Africa.

2. HSBC plans to step up its SME business, which currently accounts for nearly 22 per cent of its asset book.The bank, which has roughly 30,000 customers in the small- and medium-sized segments, may consider scaling up its key product , depending on the opportunities emerging in the market.HSBC now allows an SME client to source up to Rs 35 lakh – an overdraft facility that may be whittled down to an amount as low as Rs 2 lakh subject to the client’s requirement.

3. The cataclysmic events of last Thursday and Friday in Europe and the US took their inevitable toll of Indian markets. The Sensex fell below 15,000 and the rupee dropped past 40.60 levels against the dollar. But, in a twist to the US and the European bond markets, yields on G-Secs rose to nearly eight per cent.There was some slippage in industrial production in June, although on a year-on-year basis for the June quarter, the fall was marginal. But there is no doubting the slowdown of the economy. Non-food bank credit is climbing after a negative first quarter, but this is likely inventory financing. Anecdotal reports do not speak of great buoyancy in new investments, which is not surprising, given the recent decline in business confidence. Thus, the increase in the MSS bonds issuing limits need set off no alarm bells on interest rates.

4. Public sector banks’ overall credit exposure to small and medium enterprises grew 25.81 per cent in fiscal year 2006-07 to Rs 1,84,589 crore, surpassing the minimum 20 per cent year-on-year growth targeted for this sector.SME credit exposure of PSBs (including the State Bank Group and IDBI Bank) stood at Rs 1,46,718 crore as on March 31, 2006. In fiscal 2005-06 also, the PSBs’ overall exposure to SME sector grew over 20 per cent. The policy package on stepping up credit to SME sector, announced in Parliament in August 2005, had set the objective of doubling the flow by 2009-10, within a period of five years.

5. Think of HSBC Bank in India and you may have this impression of a stiff upper lip, British style-bank, with bankers attired in classy suits, catering to the high and mighty in clipped English accent! That’s an image undergoing change. For a start, don’t be surprised if you hear these “foreign” bankers talk to you in your local language!Ms Naina Lal Kidwai, the bank’s country head, India, puts across the transformation process more graphically. She says, “We have moved from being seen earlier as a bird of paradise – so up there, sort of lucky if it touched you – to a horse – in the sense of being seen as vibrant, fast moving and strong. That’s a transition we have made with very strong marketing.”Nowhere is this more evident than in the bank’s increasing focus on the small and medium enterprise segment as well as retail borrowers.

6. Barclays India has launched the ‘Barclays Platinum Debit card’, which is an international debit card with a host of benefits.This includes cash withdrawal facilities and benefits on dining, golf, travel, shopping and other services.Barclays’ customers can spend up to Rs 1 lakh on their card per day and withdraw the same amount from an ATM per day. Customers travelling overseas can use the card to withdraw cash from 10 lakh ATMs and make purchases at 13 lakh stores.

7. SBI Cards, a joint venture between SBI and GE Money, expects to ramp up its geographical presence to 150 cities by end-March 2008.

8. Tata Capital and Tata Investments would jointly pick up a 4.5 per cent stake in Development Credit Bank (DCB) for around Rs 85 crore. The bank would make a preferential allotment of shares to five specific group of investors, including the Tatas, for Rs 300 crore.

9. DBRS, a Canada-based rating agency, has decided to set up operations in India and is working towards making its brand a familiar name in the country. The rating agency, which has a presence in North America and Europe, sees growing business opportunities in the fast growing economies especially in areas such as infrastructure finance.

10. The borrowings of the erstwhile Industrial Credit and Investment Corporation of India (ICICI) are still haunting ICICI Bank. After the government asked ICICI Bank to free it from the sovereign guarantee it had provided for ICICI’s outstanding borrowings of nearly Rs 3,400 crore, the country’s second-largest bank has now asked the government itself to suggest a way out. Development finance institution ICICI was merged with ICICI Bank in 2002. ICICI Bank, not keen on pre-paying the loans from the Asian Development Bank and the World Bank, has written to the government, seeking clarification as to what can replace a sovereign guarantee. The government wants ICICI Bank to either pre-pay the loans or arrange for equivalent alternative guarantees.

11. The Kerala High Court has asked the Reserve Bank of India to consider the representation by A T Jacob, a shareholder of Kochi-based Lord Krishna Bank (LKB), over its merger scheme with Centurion Bank of Punjab (CBoP). Disposing a writ petition by Jacob to declare the merger scheme null and void, judge Sirijagan said that the court didn’t want to intervene in the merger procedure as the petitioner had already approached the RBI seeking to declare the scheme null and void.

Tides of 12.08.2007

1. ICICI Bank, the largest private sector bank in India, will continue with its $1.5 billion overseas loan borrowing despite the recent change in guidelines for external commercial borrowings (ECBs).

2. Triggered by the concern over global liquidity, foreign banks today tapped the term money market aggressively to raise six-month to one-year funds. According to dealers, foreign banks may have been sounded out by their parents or overseas offices to remain liquid so as to avoid a spillover impact of global liquidity problems, which have become a serious concern following defaults in the sub-prime lending markets in the US and the UK. Term money is the market where funds are available from 15-days to a year. One-month term money rates have gone up from 7.05 per cent on Thursday to 7.25 pr cent today and one-year rates moved up from 8.10 per cent to 8.25 per cent.

3. Public sector banks are likely to see an increase in their level of bad loans over the next three years to 4-5.5 per cent from 2.8 per cent at the end of March 2007 on account of higher defaults in their retail and corporate portfolios, according to a report by ratings firm ICRA. Consequently, the banks may have to make 100 basis points higher incremental provisioning over the medium term to maintain their net non-performing assets (NPA) levels reasonably low. The fresh slippage rate is expected to be at around 2-3 per cent of advances, against 1.77 per cent at the end of 2006-07, resulting in the gross NPA level moving up to 4-5.5 per cent by March 2010.

4. A bank run exclusively by children sets an example for a new economic movement. A night shelter set up by the Municipal Corporation of Delhi (MCD) becomes a buzzing hive of commerce at 6 pm every day. The doors of Children’s Development Bank — India’s only bank chain run by children — are open for business. By day, the premises serve as school that also serves mid day meals to children. But as the day comes to close, the child-adults swagger in. These are rag pickers and daily wagers engaged in menial labour — washing utensils at weddings, for instance.
Very professionally, these children deposit their earnings, withdraw money and seek advances. For many, the bank has changed their lives. Sudesh, who came to Delhi five years ago from West Bengal, used to make both ends meet by either washing utensils at parties or rag picking.

5. The banking regulator is donning the role of a scriptwriter. Wearing a new hat, the Reserve Bank of India, besides executing its mandatory functions of supervising the banking and financial sector, has taken upon itself the task of educating Indians in the finer points of finance.
With paintbrushes and felt-tipped pens in their hands, RBI officials have published two comic books over the past year — one on the basics of banking and the other, on currency notes. Interestingly, material for dissemination to the public has been drafted in-house, reflecting the creative streaks in the RBI officials. The apex bank’s unusual foray into information dissemination started when it decided to set up a steering committee comprising 15 RBI officials a year ago for looking into its add-on function of financial literacy. The regulatory body, along with supervising the volatile markets and inflationary levels in the country, has also been preparing draft material for educating various sections of the society, in a discreet fashion.

6. In a bid to improve the operational efficiency and the quality of the management systems of the urban co-operative banks (UCBs) in West Bengal, the Reserve Bank of India from now on, would assess their training and computerisation needs."This would improve the human resource skill and the infrastructure of the Urban Cooperative banks in West Bengal and consequently improve the performance."

Tides of 11.08.2007

1. As independent India turns 60, banks are poised for a leap in to the future. Significantly, the international rating agency Moody’s have given the banking system a ‘stable’ rating. Commercial banking in India has a 200-year history.

2. The forex kitty rose by $3.992 billion to $229.342 billion for the week ended August 3, backed by strong FII inflows and continuous intervention by the Reserve Bank of India in the forex market. “The strong FII inflows and constant RBI intervention to cap the appreciation of rupee has attributed to the increase in reserves.”

3. 10 Public sector banks have been losing market share to new private sector banks and foreign banks. Their share in terms of total assets has come down from 80.2 per cent in 1997-98 to 70.3 per cent in 2006-07. In terms of total business, it has come down from 80.9 per cent to 73 per cent.How should the PSBs compete in this scenario ? By using their strengths—large branch network and manpower—to tap the potential of rural markets, according to Ms Usha Thorat, Deputy Governor, Reserve Bank of India.

4. Corporation Bank is planning to use the ‘branchless banking’ model to bring more villages under financial inclusion in un-banked areas. The bank, which has implemented this model in two villages in Dakshina Kannada district on a pilot basis, is planning to implement this operating model in 200 villages in the country in the next 12 months.

5. Switzerland wants India to further liberalise its markets for banking services. A case is also being made for the country to look at reducing taxes on Swiss watches.
“The market (for banking) is kind of protected by the Government. You should liberalise and open it up,” Ms Doris Leuthard, Federal Councillor and Minister of Economic Affairs, told Business Line.“We face this problem in many developing countries. It would also be in India’s interest to allow competitors to come here.”She said that the need to further open up the banking sector would be discussed in her interaction with the Finance Minister, Mr P. Chidambaram.Another issue that would be raised before the Government is the high level of taxes on Swiss watches, she added.The Swiss Minister said that high taxes (about 48 per cent of the price) come in the way of sales of Swiss watches in India.

6. The phenomenon of migration and remittances, without doubt, have been among the greatest integrators and levellers levelers of the 20th century. To a certain extent, it has reduced inequity, ameliorated poverty, increased the demand for education and improved the quality of life among several developing countries. To the ageing population of the developed world, it has brought a young-blooded workforce, increased efficiency of labour markets and helped to bridge cost differentials between the First and Third World countries.

7. The Ministry of Railways has allowed nine more banks to install ATMs at railway stations. The nine banks are: Bank of Rajasthan, Bank of India, Indian Overseas Bank, ICICI Bank, UTI Bank, UCO Bank, HDFC Bank, Syndicate Bank and J&K Bank. The banks will set up ATMs at 440 locations, taking the total ATM locations to 1,833 across the country, said a press release. Out of these, more than 1,200 locations will have e-ticketing facilities through Internet kiosks installed alongside the ATMs.

8. Recapitalisation bonds worth Rs 3,150 crore, part of the stock of bonds that Indian Bank received from the Government of India between 1998 and 2003, have been swapped for other government securities that qualify as ‘SLR securities’.

9. Deutsche Bank wants to ramp up its distribution for credit cards to 25 cities and is in talks with prospective programme partners with strong distribution network for this purpose.The bank’s credit card business in India is little over a year old and already has issued over 2,50,000 cards. Currently, Deutsche Bank operates out of seven cities including Kolhapur and Aurangabad, where branches were opened recently.10. SBI Card, a joint venture between State Bank of India and GE Money, on Thursday announced its foray into the premium credit card space through the launch of the ‘SBI Platinum Card’, in association with Visa International.
The SBI Platinum card would allow a customer certain international and domestic travel benefits, including Concierge services, waiver of the 3.5 per cent surcharge on spends made abroad in foreign currencies, privileges on restaurants and spas and travel insurance. SBI Card expects at least 1,00,000 SBI Platinum Cards to be issued this fiscal

10. The curbs on external commercial borrowings (ECBs) announced by the Finance Ministry have wide repercussions on the system. Who is going to be affected? Who would benefit? Will domestic interest rates move up?Mr Moses Harding, Executive Vice-President and Head, Wholesale Banking Group, IndusInd Bank, responds to a couple of questions from Business Line on the impact of these moves.

Tides of 9.08.2007

1. Punjab National Bank (PNB) on Wednesday paid a final dividend of 60 per cent amounting to Rs 109.34 crore to the Union Government for 2006-07.The bank had already paid an interim dividend of 40 per cent amounting to Rs 72.90 crore to the Central Government.

2. As many as 90 million Indian borrower accounts and 1.2 million commercial borrowers are now in the Credit Information bureau net. If these borrowers were to approach other banks for loans, the chances are that banks would be better prepared. They would very likely have some knowledge of their background including earlier loans taken and credit card borrowings. If these borrowers hid anything or gave fake addresses, there is a good possibility of being found out.

3. ICICI Bank, which saw a growth of 40 per cent in its small and medium enterprise business segment last year and currently services one million SME clients, has tied up with International Finance Corporation and IBM to offer an ‘SME toolkit’. This is a Web site which provides information and advice to help SMEs start, finance and grow their business. This toolkit has been launched in 24 countries and in 13 languages.

4. Deutsche Bank expects its non-banking finance company (NBFC) operations in India to commence in early 2008. The proposed NBFC would be entirely owned by Deutsche Bank. Currently, Deutsche Bank has 10 bank branches in India. The NBFC is expected to initially focus on consumer loans.

5. State Bank of India is looking at an increase of ‘at least one percentage point’ market share to 11 per cent in the current fiscal with the rolling out of ‘Project Parivartan,’ an HR programme targeted at clerical staff and officers. Announcing the details of the programme, Ms Mahpara Ali, Chief General Manager of the Bangalore Circle, said though training is an ongoing effort at SBI, this was the first time that such a transformation exercise and a multi-level communication programme has been attempted. “The programme is about sensitising each employee about the bank’s transformation and energising them to be change agents with a focus on customer delight.”

6. Banks in India have achieved international standards in respect of prudential norms, including capital adequacy, levels of NPLs and are poised to adopt Basel-II norms for risk management. In the process of managing a bank prudently and efficiently balancing the compliance with all international standards, there are some tools such as securitisation of assets, freedom to fix interest rates and rights of foreclosure which need to be made available to banks to facilitate compliance with regulatory requirements. While the Reserve Bank of India has provided such environment in the matter of recovery rights and liberalised regulations, as far as securitisation of financial assets are concerned, there is a need to undertake further legislative reforms for making securitisation really an effective tool for asset-liability management and exposure norms.

7. Reserve Bank on Tuesday said foreign institutional investors cannot purchase shares of Delhi-based IFCI as foreign exposure has reached the trigger limit of 22 per cent of its paid up capital. No fresh investment can be made by FIIs in the company without obtaining prior permission, RBI said in a release. IFCI last week decided it will invite preliminary bids for inducting a strategic partner from August 13.

8. After ATMs, here come biometric ATMs. NCR Corporation — a manufacturer of automated teller machines (ATMs) — is planning to roll out biometric ATMs in India which will recognise a user by his fingerprint. These ATMs do not require a debit or credit card or a personal identification number (PIN) for banking.The company is running a pilot in India in partnership with leading banks. “The pilots are nearly through and we will soon go in for the rollout,” an NCR spokesperson says. Besides helping villagers get access to ATMs, this would also help sort out security-related issues by minimising the use of skimmed (counterfeit) cards, he adds.In biometric ATMs, the fingerprint of the account-holder needs to be captured and stored by the respective banks or a third party in a database to which the bank has access. A user needs to verify his fingerprint before making the transaction. Additionally, he will be supported with voice instructions in his local language on how to withdraw money, check the balance or for any other transaction.

9. The Centre is planning to raise the ceiling on foreign equity holding in public sector banks to enable them to mop up the required capital for meeting higher capital requirements and to fund growth. To help public sector banks raise Rs 31,300 crore by March 2009, the government is trying to act on a recommendation by a Indian Banks’ Association panel to lower the minimum dividend-payment requirement for the public sector banks. Banks now pay a dividend of 20 per cent of net profit or paid-up capital, whichever is higher. The government is also examining a proposal to allow splitting of shares. “Splitting of shares will enable banks to attract more investors as the price will be affordable. It will also improve liquidity of bank stocks,” said a senior IBA official. Stock split, from Rs 10 to Rs 5 or Re 1, is expected to enhance the market price of the shares of public sector banks.

Tides of 7.08.2007

1. The Institute of Finance, Banking & Insurance has set up centres in Ahmedabad and Pune and added two more in Delhi NCR, taking the total tally to 10 across the country. The institute has also extended its portfolio by partnering with three banks through which it will conduct training programme for the new and existing employees of the banks on the basics and core banking software solution.

2. TCS Financial Solutions, the strategic business unit of Tata Consultancy Services (TCS), is targeting Asia Pacific, West Asia, Africa and Latin America for its financial products suite BaNCS. It has bagged 150 deals in the financial sector, ranging from $5 million to $200 million. Twenty per cent of these are large ones, between $30 million to $200 million.The unit already supports two large banks – SBI and Bank of China. With a total of 225 customers, it has 35 live installations in fiscal 2007. Eleven new customers were added in the first quarter.

3. The inter-bank call rates rose to 6 per cent — between RBI’s signal rates of repo and reverse repo — on Monday, the first trading day after the 50 basis point hike in CRR came into effect on August 4. The call closed at 6-6.10 per cent higher than the previous close of 2- 2.25 per cent. The rates have been hovering below 1 per cent levels for the past few weeks, due to surplus cash in the system. The hike in CRR has drained the banking system of about Rs 15,000-16,000 crore. Dealers however do not anticipate the rates to go up further immediately.

4. Loan seekers would have the opportunity to interact directly with banks through a live chat to get their loan queries answered. Deal4loans.com is organising a chat session for the customers in New Delhi on August 8, where they would be able to get live quotes, compare offerings from various banks and get the EMI calculated. The portal would organise such chat sessions in other cities later. Deals4loans acts as a mediator between the loan seeker and institutions providing t he loan. Deal4loans offers all information on home loans, car loans, personal loans, loans against property and credit cards.

5. As part of its exercise to provide additional services to customers, Canara Bank will enter into a tie-up with several financial and service sector institutions including Kingfisher, Indian and Jet Airways.The tie-up will facilitate the bank’s customers to book air-tickets.
The proposal has already been approved and will be implemented shortly. The bank would also tie-up with Paymate and Bill Junction.com. Credit/debit cardholders of Canara Bank could make payments towards services such as power consumption bills, water-tax and also buy consumer goods. It would also enter into a tie-up with the National Financial Switch and State Bank of India and its subsidiaries to interconnect 20,000 automated teller machines (ATMs) of 28 banks.

6. To sensitise accounting professionals about auditing in Information Technology (IT) environment, Comptroller and Auditor General of India today launched a month-long international training programme. The course has received participation from 22 members across 14 countries, including Armenia, Bangladesh, Bahrain, Indonesia, Maldives, Malaysia and Saudi Arabia, said Deputy CAG Bharti Prasad. The training programme would cover areas like general and application control, IT frameworks like COBIT and computer assisted tools such as IDEA, Excel and Access.

7. State Bank of India (market capitalisation: over Rs 86,000 crore) is planning a stock split. The bank, which is considering a number of capital raising plans—including a follow-on public offer and hiving off 10% in its proposed insurance asset management holding company—is awaiting passage of the SBI Act Amendment Bill before taking a final decision on the stock split.

8.

Tides of 5.08.2007

1. State Bank of India wants to use its vast branch network to get a little more of the fee income from credit card purchases. It plans to acquire one million Point of Sale (POS) terminals,machines used to swipe credit cards ,over the next three years and put them up at shops. “It will act as a source of income for the bank. However, the customer would not be charged for the same.”

2. IFCI Ltd expects to complete the process of induction of a strategic investor with a 26 per cent stake in the company by end-January next year.

3. The country’s forex reserves rose $3.307 billion to $225.350 billion in the week ended July 27 on account of intervention by the RBI. The RBI was seen buying dollars vigorously to cap the appreciation of rupee beyond 40.35 levels contributing to the huge reserves.” The home currency thereby weakened by about 15 paise in the week under consideration to close at 40.50/51 on July 27. The reserves had increased by $3.807 billion to $222.043 billion for the week ended July 20, said the RBI’s Weekly Statistical Supplement. The foreign currency assets rose $3.306 billion to $218.096 billion. Foreign currency assets, as expressed in dollars, include the effect of appreciation or depreciation in non-US currencies (euro, sterling and yen) held in reserves.

4. It has been a very profitable first quarter for public sector banks. With almost the entire set of numbers coming in from PSBs, save three, it is clear that they have raked in a lot. Twenty-five public sector banks saw their first quarter profits rise a whopping 47 per cent. The growth numbers of course were ranged across the entire spectrum, and could look a trifle rosier because of the extreme deviations on the scorecard. Even so, the median growth for this segment was 34 per cent.The contribution from the staple diet of interest income was significant while other income (that comprises earnings from commission, exchange brokerage, profit on sale of land or buildings or other assets, etc.) also showed stable growth. Interest income for the group grew 33 per cent while other income rose 22%.

5. To make the Mercedes Benz more affordable to its customers, DaimlerChrysler has tied up with ICICI Bank. ‘Star choice’ is being offered to customers with three options , financing at 9.9% interest rate, low down payment (as low as 5%), and Rs 29,999 as EMI (equated monthly instalment). Offers are valid till September.

6. Banks can now negotiate a Letter of Credit where the negotiation of bills drawn under LC is restricted to a particular bank, and the beneficiary of the LC is not a constituent of that bank.The LC can be negotiated subject to the condition that the proceeds will be remitted to the regular banker of the beneficiary. The guidelines of RBI will come into effect with immediate effect. Banks can also negotiate bills drawn under LCs, on ‘with recourse’ or ’without recourse’ basis, as per their discretion and based on their perception about the credit worthiness of the LC issuing bank.