Tides of 24.12.2008

1. Private sector banks have sought relaxation in the present norm that limits the deployment of business correspondents within 15 km range of a branch to give them flexibility in operations to meet the target for financial inclusion. The original intention of the 15-km restriction was to ensure timely service to customers, especially in the rural areas. But now, new generation private banks do not have an extensive branch network in semi-urban and rural areas.
2. The work at the insurance offices in northern Karnataka came to a standstill on Tuesday following the strike call by the Insurance Employees Associations to the Centre’s move to introduce two bills concerning insurance sector. Class I, III and IV employees of LIC and class III and IV employees of General Insurance Corporation participated in the strike. They also opposed the introduction of bill to amend GIBNA Act 1972 and LIC Act 1956.
3. The government today issued 6.35 per cent Oil Marketing Companies Government of India Special Bonds, 2024 for Rs 22,000 crore to three oil marketing companies. These bonds were distributed to Indian Oil Corporation (Rs 11,975.51 crore), Hindustan Petroleum (Rs 4,693.73 crore)and Bharat Petroleum (Rs 5,330.76 crore). These bonds have been issued for compensation towards estimated under-recoveries on account of sale of sensitive petroleum products in the current financial year.
4. State Bank of India (SBI) plans to raise capital up to Rs 1,500 crore through lower tier-II bonds to shore up capital adequacy ratio and support business growth. These bonds carry AAA/stable rating from Crisil. The tenure of this paper is expected to be 10 years. “The yields on the 10-year government bonds dipped from around 8.6 per cent at the end of September to about 5.7 per cent now. Hence, the bank will save on costs as it will be in a position to place bonds at lesser rates now,” a senior SBI official said.
5. The government is likely to announce in a few days details of insurance sops on export credit to banks and exporters as part of the first fiscal stimulus package, said S Prabhakaran, executive director, Export Credit Guarantee Corporation of India (ECGC). “The government will compensate an additional 10 per cent for insurance to exporters and overseas buyers, as well credit guarantees operated for banks.
6. Despite sharp erosion in the net worth of airline companies due to losses in the recent past, banks and financial institutions have decided to sanction loans to some of them including Jet Airways and Kingfisher Airlines, while some of the companies in this sector are still waiting. According to senior officials of a public sector bank, full service carrier Jet Airways has been sanctioned a loan worth Rs 700-800 crore from a consortium of public sector banks that includes Punjab National Bank and State Bank of India.

Tides of 30.10.2008

1.While there is a global credit crisis hitting the world’s leading banks, the country’s largest bank is cruising in profit mode, but is in no mood to reduce lending rates to stoke demand-led growth.The State Bank of India (SBI) said on Monday it would maintain “status quo” on lending rates even though there were signs of that softening in the coming months.“Interest rates have peaked. You could see some moderation in coming months,” SBI Chairman OP Bhatt said after announcing a 40 per cent increase in net profit during the second quarter ended September 2008 compared with the same period a year ago.Bhatt said inflation was beginning to moderate and there was adequate liquidity in the system.
2. ICICI Bank, India's second-largest bank, reported a 1.1 per cent rise in quarterly net profit, beating forecasts, as higher other income and lending rates offset investment losses and slowing credit growth.The country's leading private-sector bank, which is also listed in New York, said July-September net profit was 10.14 billion rupees ($203 million), up from 10.03 billion rupees a year ago.A Reuters poll of analysts had forecast a 2.3 per cent dip in net profit to 9.80 billion rupees for the fiscal second quarter.ICICI has borne the brunt of investor concerns about the Indian bank sector's exposure to the global financial crisis. Since the bankruptcy of Lehman Brothers last month, it has repeatedly said it was well-capitalised and deposits were safe.
3.The Reserve Bank wants depositors to get less, so that borrowers can get loans cheaper. It wants public sector banks to reduce interest rates on deposits.In a rare move, the central bank did this alongside Governor Duvvuri Subbarao’s maiden policy, with the assurance that liquidity (funds) will not be a constraint, three public sector bank executives told Hindustan Times on condition of anonymity. What this means is that the RBI would release funds from its own system.Subbarao addressed chiefs of state-owned banks after Friday’s policy and seemed to be looking for a new way after banks declined to take a cue from last Monday’s one percentage point cut in the repo (repurchase) rate at which RBI lends money to banks for up to two weeks.Banks have been complaining about deposit rates being too high, with fears that depositors may flee if rates were cut. Now, RBI is offering a cushion against that. One banker said RBI is trying to convey the impression that high interest rates are hurting industry and accentuating a slowdown.
4. Bank of Baroda on Saturday said its net profit for the second quarter ended September 30 stood at Rs 395.29 crore, a 20.81 per cent growth over the corresponding period a year ago.The bank had a net profit of Rs 327.19 crore for the September quarter last fiscal, Bank of Baroda said in a filing to the Bombay Stock Exchange.Total income rose to Rs 4,026.90 crore for the quarter under review from Rs 3,333.83 crore for the same period last fiscal.For the six months ended September 30, 2008, Bank of Baroda registered a net profit of Rs 766.14 crore, against Rs 658.03 crore for the same period last year.While, total income for the six months ended September 30 rose to Rs 7,833.26 crore from Rs 6,358.63 crore for the same period a year ago.The RBI’s best GDP growth estimate now is 7.5-8.00, down from 8.00 per cent forecast in April 2008 and July 2008, compared with 9 per cent growth in 2007-08.
5. The Reserve Bank of India (RBI) had no choice but to sit tight during the quarterly monetary policy review released on Friday, though it led to the steepest ever fall in Indian stock markets, according to global rating agency Moody's.In the latest mid term policy review, the central bank left repurchase rate, reverse repurchase rate and the cash reserve ratio unchanged at 8 per cent, 6 per cent and 6.5 per cent, respectively.“The recent slide of the rupee has stopped the central bank from further loosening monetary policy, which may stimulate the economy but increase the risk of capital flight,” Sherman Chan, economist with Moody's economy.com said.“The rupee has shed more than a quarter of its value breaking the important psychological level of $50. This is extremely concerning, from a macroeconomic management perspective, as a weak currency creates inflationary pressures.“Wholesale price growth, despite gradually easing, is still in double-digit territory, and this is viewed as 'unacceptable' by the central bank, whose tolerance rate is set at 5 percent.
6. State-owned commercial banks are expected to garner at least Rs 20,000 crore of additional bulk-deposits from public sector enterprises following an advisory from the finance ministry that government-owned companies should park their surplus cash with state-controlled banks.
7. Union Finance Minister P Chidambaram will meet the heads of public sectors banks and financial institutions, like IFCI and Small Industries Development Bank of India (Sidbi) on Tuesday to review their performance for the second quarter ended September 2008.
8. Regional rural banks (RRBs), which have been playing a key role in rural lending, are now seeking more visibility and parity with commercial banks.The RRBs have complained to the government that some state governments, corporations and embassies are not treating them on par with other banks.
9. Non-deposit-taking non-banking finance companies (NBFCs), with an asset size of Rs 100 crore and above, can now increase their capital funds by issuing perpetual debt instruments (PDIs).
10. Private sector Federal Bank, with its Rs 48,000-crore business, is looking to enter the wealth management space, especially for catering to its huge NRI clientele.

Tides of 23.10.2008

1. The Reserve Bank further relaxed external commercial borrowing guidelines and allowed companies to bring in funds up to $500 million for rupee expenditure under the automatic route.

2. ICICI Home Finance Co (I-HFC), the home-loan arm and subsidiary of ICICI Bank, has increased the interest rate on its new home loans by 1 percentage point.

3. P Chidambaram said Govt will inject fresh capital in seven public sector banks to improve their financial health and help them achieve a capital adequacy ratio of over 12 per cent.

4. Many banks are still busy borrowing large amounts from the Reserve Bank of India, while policy-makers in New Delhi ponder measures to keep the cash taps flowing.

5. As a result of the global credit crunch several countries have passed laws guaranteeing their depositors' savings.

6. The decline in growth in insurance premium collection, post the rise in inflation and global economic slowdown, has affected the state-owned Life Insurance Corporation the most.

7. Though the Govt has talked down inter-bank borrowing rates, the nation’s banks are still has large liquidity gaps — which means they are short of cash to meeting commitments.

8. With the global financial crisis spreading its wings across the globe, the Indian banking industry has quietly adopted a cautious lending policy, particularly towards the small and medium enterprises (SMEs).

9. The Reserve Bank of India has issued guidelines paving the way for subscribers of mobile-banking services to send and receive up to Rs 5,000 a day through their phones.

10. Investors depositing their money with the banks are opting for long term maturity plans instead of medium and short term to park their money, says an RBI report.

Tides of 22.10.2008

1. Pulock Chatterji, Secretary in Prime Minister Manmohan Singh's Office, has been appointed as the new executive director of World Bank for a term of three years beginning February 1, 2009.

2. The big banks are safe and smaller ones are getting a face lift. The government on Monday sought parliament approval to restructure the capital base of state-owned Uco Bank and Punjab & Sind Bank, aiming to help them lower their equity that would increase earning-per-share as they dress up go public. A supplementary demand for grants Finance Minister P Chidambaram said the government plans to convert Rs 250 crore of Uco Bank’s equity into “perpetual non-cumulative shares,” while Rs 560 crore of Punjab and Sind Bank will be converted into similar debt instruments.

3. If you are waiting to see a cut in your home or car loan rate after Monday’s cut by the Reserve Bank of India (RBI) in its signal repurchase (repo) rate by one percentage point, you may have to wait longer. Bankers are waiting to see what it does to their costs – and that may take a couple of months. There is nothing on the horizon to suggest a deposit rate cut either, because the RBI has freed up more than Rs. 1,00,000 crore from its cash reserves since October 11. The Prime Lending Rate (PLR) that bankers set is yet to take a cue from the repo.

4. The Indian government on Monday said banks have exposure of US$ 336 million in US-based investment bank Lehman Brothers, which has filed for bankruptcy.The banks' exposure to Lehman Brothers is US$ 336 million (Rs 1,580 crore) as on September 30, Finance Minister P Chidambaram told Lok Sabha in a written reply.The exposure mainly consisted of investments in floating rate notes, nastro balances, bank guarantees, forex exposures, etc, he said.
The banks have made aggregate provision of US$ 47.3 million (about Rs 220 crore) on these exposures.

5. Indian Bank has earned a net profit of Rs 282.93 crore for the first quarter of the current fiscal against Rs 247.59 crore for the corresponding period of last fiscal. The Bank Chairman MS Sundarajan, releasing the unaudited financial results for the quarter, told reporters that the profit recorded a growth of 14.27 per cent over the previous year.The deposits, gross advances and total business also recorded a growth of 20.22 per cent, 47.36 per cent and 30.47 per cent respectively during the quarter.The deposits stood at Rs 64,614 crore against Rs 53,747 crore for the corresponding period of the last fiscal, advances at Rs 48,092 crore against Rs 32,636 crore and total business was Rs 1,12,706 crore against Rs 86,383 crore, he said.He said that the current global financial problem would not have any impact on the Bank's performence as it had lot of liqudity.

6. Public sector banks (PSBs) are giving more trouble to cash-crunched mutual funds (MFs) by not honouring some credit instruments and charging as high as 16 per cent, despite a special lending window set up by Reserve Bank of India (RBI) this week.MFs have seen Rs 36,000 crore flow out this month due to liquid fund redemptions by corporate customers, after a drain of Rs. 45,000 crore in September.The RBI has allowed MFs to borrow against bond-like certificates of deposits (CDs) but state-run banks are not accepting CDs issued by private banks. “If PSBs are practising discrimination on the papers of private and public sector banks, it is unfair,” said AP Kurien, chairman, Association of Mutual funds of India.

7. Public sector banks, with a market share of over 80 per cent, are gripped with a severe talent crunch. PSU banks are not really hot with those with the right qualifications and the few that do are quick to jump ship, leaving the behemoth banks with an attrition problem. But things might change soon.In a bid to draw talent, attractive pay packages for the entry level employees are on the cards. Industry sources say that the issue will be taken up once negotiations involving trade unions, government and the Indian Banks Association begin for wage revision, which is expected soon.

8. Clearing and settlement of around 120,000 transactions amounting to a total volume of Rs 4 lakh crore on the real-time gross settlement and electronic fund transfer platform came to a grinding halt today as the employees of the Reserve Bank of India (RBI) struck work across the country.there was no settlement in the domestic money market, transactions in the foreign exchange market will be settled tomorrow (under the T+1 settlement as against the usual practice of the real-time settlement).A banking source said that if the current trend continues, state-owned banks would have very few qualified people left to man the show by 2020. About 50 per cent of the officers currently employed with PSU banks are over the age of 40.

9. It had been a week like never before on Wall Street. Lehman Brothers Holdings, the fourth-largest US securities firm, was bankrupt. The credit markets, which Goldman uses to fund its business, were frozen. And Treasury Secretary Henry Paulson, Blankfein’s predecessor as chief executive officer of Goldman, was begging the Congress for $700 billion to save the financial system. Goldman’s stock had plunged as much as 26 per cent in just one day.In the brief meeting in lower Manhattan that warm Sunday, according to a person familiar with the events, Blankfein told his lieutenants the firm would become a bank holding company, ending its run as the jewel of global investment banks.

10. ICICI Prudential Life Insurance reported a 56 per cent growth in premium in the half year ended September 30, 2008. The premium rose to Rs 6,726 crore from Rs 4,311 crore in the corresponding period last year.The insurance firm wrote 1,285,000 policies at a sum of Rs 1,82,427 crore in the period from April to September 2008 as against 1,099,000 policies in the same period last year, a growth of 17 per cent. Renewal premium rose significantly by 90 per cent to 3,423 crore.

Tides of 7.09.2008

ICICI Bank to help in child education
UTVi News - 5:4 hr ago
MUMBAI: Leading private lender ICICI Bank has joined hands with NGOs to reach out to children in ten states helping them have better access to education.The bank, on World Literacy Day tomorrow, has...Israeli Cabinet discusses West Bank evacuation plan
DDI News - 56 minutes ago
The Israeli Cabinet on Sunday discussed an initiative proposing voluntary evacuation of and compensation for settlers living in West Bank under any future peace agreement with Palestinians, even as...'No-frill' bank accounts cross 1 cr-mark
UTVi News - 2:28 hr ago
MUMBAI: 'No frill' accounts, which brought banking to the doorsteps of poor, has crossed the one crore-mark, according to latest figures made available by the Reserve Bank.

Tides of 6.09.2008

Union Bank launches Gift, Payroll cards
State-owned Union Bank of India today launched two prepaid cards - Gift and Payroll.
Text book independence for RBI is dangerous: Reddy
The outgoing RBI governor Yana Venugopal Reddy today cautioned that text book independence for the central bank is dangerous in the Indian context.
US Dollar sharply dearer against rupee
The U.S. Dollar sharply dearer against the rupee at Rs.44.64/65 per dollar but the Pound Sterling turned lower to Rs.78.64/66 per pound at the interbank Foreign Exchange (Forex) market here today.
CS Bank launches 'unique' gift card
With the festival season round the corner, Kerala based private Catholic Syrian Bank launched a unique user friendly Gift card 'CSB Uaphaar' here.
ING Vysya Bank gets RBI nod for expansion
Private sector bank ING Vysya Bank has received the approval from the Reserve Bank of India (RBI) for opening 56 new branches and 100 ATMs across the country during the current fiscal.
Subbarao takes over as RBI Governor
Duvvuri Subbarao today took charge as the new RBI Governor and said his immediate priority would be to contain inflation and pursue financial sector reforms.
D Subbarao takes charge as Reserve Bank Governor.
Priority is to manage inflation, anchor inflationary expectations: Subbarao.
Banks need to raise Rs 5,70,000 cr
The Reserve Bank report on Currency and Finance has projected that banks in India will need to raise a whopping Rs 5,70,000 crore over a five year period starting 2007-08 to maintain capital adequacy of 12 per cent.
'No M&A games between big banks'
Reserve Bank said that consolidation in the system should be among smaller and weaker banks as mergers among bigger players could undermine competition.
Rupee steady at 44.36/37 a dollar in early trade
The Indian rupee traded around its last closing levels after opening weak against the greenback in early trade today on some dollar selling amid a sharp fall in Asian equity markets.
Rupee recovers by eight paise to 44.35/36 a dollar
Snapping its four-day falling streak, the Indian rupee today gained eight paise at 44.35/36 against the US currency on dollar selling by banks amid sluggish equity markets.
'Pay windfall, crude, loan waiver may hurt'
The Reserve Bank of India (RBI) today warned that finances of the Central Government may come under pressure this fiscal due to implementation of recommendations of the Sixth Pay Commission, higher oil prices, fertiliser subsidies and farm-loan waiver.
RBI hints at continuing with hawkish monetary policy
Reserve Bank today indicated that there would be no softening of its hawkish monetary stance to contain inflation, which is 12.34 per cent, as volatile food and energy prices remained a challenge.
Prepare for full float of rupee: RBI
Reserve Bank of India today said Indian banks should gear themselves to face the risks of full float of rupee which is expected to happen by 2011.
Stanchart gets spooked by defaulters
Foreign banking major, Standard Chartered Bank, today said it has decided to be 'selective' in choosing its customers in the face of rising defaults in the country's retail banking sector.
Manappuram to receive Rs 108 cr capital infusion
The Kerala-based NBFC Manappuram Group of Companies will receive fresh capital infusion of Rs 108 crore from UK and US based private equity firm, which will be used for expansion purposes to add about 200 more branches this year, a top company official said.
Syndicate Bank hikes term deposit rates
Syndicate Bank has revised the rates of interest upwards on domestic term deposits for the tenor 180 days to less than two years from tomorrow.
Exporters were aware of risks: Bankers
Amid allegations by exporters that some banks "trapped" them into buying forex derivatives that led to huge losses, bankers said investors were fully aware of the risks.
HDFC Bank customers suffer ATM, Net crash
Private sector lender, HDFC Bank on Wednesday said it has restored operations in its ATM, Internet Banking divisions that were disrupted on Tuesday due to a technical snag.
Rupee eases by two paise against dollar
The Indian rupee today moved down by two paise to 44.45/46, against the greenback due to fall in equity markets amid dollar buying by some banks.
'Banks mis-selling to exporters'
Small and medium exporters today charged some leading banks with "trapping" them into buying forex derivatives and pushing them into losses of around Rs 2,000 crore on mark-to-market basis and asked the Government and RBI to intervene in the matter.

Tides of 15.08.2008

1 A resolution of Lakshmi Vilas Bank to raise funds through issue of shares to qualified institutions was passed by shareholders on Thursday at the annual general meeting, after the management agreed to modify the resolution.Sources said that a number of shareholders spoke in opposition, but voted for it after the management modified the resolution to the effect that the shares will be sold at a price not less than 2.5 times the book value at the time of placement of shares.Lakshmi Vilas Bank’s book value today stands at around Rs 85. At this level then, the shares cannot be placed at Rs 212.50 a share. On the National Stock Exchange, the bank’s shares closed today at Rs 94, less than Rs 0.45 than the previous close.The Bank’s Managing Director, Mr V. S. Reddy, told Business Line today that the management decided to modify the resolution to allay fears that the shares would be given away at a low price.

2. Karur Vysya Bank has effected an upward revision of 50 basis points on the rates offered on term deposits in time buckets ranging from 181 days to 3 years, from August 11. The interest on deposits for periods from 181 days but less than 1 year has been hiked by 50 basis points to 8.50 per cent and deposits in the one to two year time period by 25 bps to 9.75 per cent (9.50 per cent) and deposits maturing beyond 2 years and inclusive of 3 years would earn 10 per cent (9.75 per cent). It has also hiked its benchmark prime lending rate to 15.25 per cent with immediate effect..

3.The Finance Minister, Mr P. Chidambaram, on Wednesday said that Central public sector enterprises (CPSEs) appear to be violating Government departmental guidelines on placement of funds with banks.“They (CPSEs) are continuing to call for competitive bids… nor are they observing the guidelines that 60 per cent of public sector companies’ monies should be kept with public sector banks. I intend to take up this matter with the Department of Public Enterprises (DPE)”, Mr Chidambaram told reporters after a meeting with the chief executives of public sector banks here today.

4. ith certificates of deposit (CD) headed to breach the 11-per cent mark on the back of tight liquidity, banks have started waiving penalties for loan prepayments.Prepayment penalties were mostly levied by the domestic private sector and foreign banks. The penalties ranged anywhere between one and three per cent of the outstanding loan principal amount. Public sector banks have long done way with the prepayment charges. But private sector banks have now followed suit.ING -Vysya Bank sources said, “We have already done away with penalties on partial prepayments.”Banks typically resisted prepayments when interest rates were low and liquidity was in surplus.Bankers said that the move was influenced by tight liquidity conditions and soaring costs of working funds.The Finance Minister also plans to talk to the Minister concerned (Ministry of Heavy Industries) and call a meeting of CPSEs to urge them to desist from such an unhealthy practice.

5.The recent appreciation of the euro against the Indian rupee has underlined a point that most corporate CFOs intuitively know, but apparently do not always play by: there is a need to be well hedged.Last year, taking a call on the rupee was a one-way bet. Those who had to receive dollar – such as exporters – were battered, while those who had to make payments in the currency were thrilled. The rupee was going down slightly against the euro, and suggestions about shifting to euro receivables were commonplace.Now, the complete reversal of the trend in the last few weeks has turned the spotlight on the need to manage currencies better.

6. Bank unions are planning a one-day strike on August 20 to protest the merger of public sector banks, even as the final Government order on merger of State Bank of Saurashtra with State Bank of India is expected any time now.A union official said three bank unions — All India Bank Officers Association (AIBOA), All India Bank Employees Association (AIBEA) and the Bank Employees Federation of India (BEFI) will join the strike. The other six bank unions have decided not to join the strike and are adopting a wait and watch policy. The merger of State Bank of Saurashtra with SBI is only a prelude for things to come, with the Government looking at privatisation.

.7. HSBC would like to hold on to its stake in Indian private sector lender Axis Bank in the short-term, its India head said on Wednesday.Naina Lal Kidwai, HSBC's country head, said it did not make sense to sell the shares after a fall in the stock's price. Axis Bank shares are down more than 20 percent in 2008.

8. According to research by Seclore Technology, a data security firm that developed the Filesecure information protection software, 80 per cent of consumers’ personal information lies in unprotected files.This lack of security means pesky telemarketers could get hold of your personal information and phone numbers easily, terror groups could use your name and details to send threats, and corporate rivals could get hold of soft copies of your company letterhead to sabotage your operations and ruin your name.

9.State Bank of India (SBI) has launched its first debit card in Canada to raise its client profile in Toronto.SBI is also looking at 84 locations globally to increase its association with international business, chairman OP Bhatt said Wednesday while launching the card in Toronto.With seven branches across Canada, the State Bank of India-Canada (SBIC) - SBI's 100 per cent-owned subsidiary - claims to have captured 65 per cent of the trade conducted between that country and India.

10. A working group set up by the Reserve Bank of India has suggested that all the regional rural banks (RRBs) should move to the core banking platform by September 2011. This will help them undertake 90 per cent of their business on the platform.The cost of moving RRBs to core banking services (CBS) is estimated at Rs 730.78 crore. All RRBs are likely to get financial help but sponsor banks may have to contribute 25 per cent of the cost.

Tides of 11.08.2008

1. Rising bond yields and more flexible regulations have paved the way for the return of foreign institutional investors (FIIs) to the Indian debt market. FIIs, who were nearly absent from the debt market for most part of the year, have stepped up investments in July. According to SEBI data, FIIs invested around $897 million in the debt market in July, while in March, April, May and June, their investments have been negative. FIIs’ outflows between March and June were around $928 million.FIIs had, however, started off the year on a positive note by investing $484 million and $619 million in January and February, respectively. The FIIs are now seeing a significant arbitrage opportunity in debt investment.

2. Max New York Life Insurance plans to expand its distribution network by opening more than 250 new offices every year for the next three to four years and increasing the number of agent advisors from the current 46,800 to 3 lakh. The growth in agency distribution will be complemented by strong growth in partnership distribution. The capital base of the company is expected to expand to Rs 3,600 crore from the current equity base of Rs 1,232 crore. The company has clocked Rs 2,100 crore in collected premium for the January-July 2008 period, recording a growth of 81 per cent over the similar period last year.

3. The Bombay Stock Exchange (BSE) has applied to capital market regulator SEBI for setting up a currency derivative segment. The Reserve Bank of India and SEBI issued the final guidelines for launch of currency derivatives last week. Currency derivatives or currency futures are standardised foreign exchange derivative contracts traded on a stock exchange to buy or sell one currency against another on a specified future date, at a price specified on the date of contract, but does not include a forward contract. The Exchange Traded Currency Futures (ETCF) contracts facilitate increased transparency, efficient price discovery as well as reduced transaction costs. It also enables better counterparty credit risk management, wider participation. “BSE has applied to SEBI for setting up a Currency Derivatives Segment in line with the recommendations laid down in the Report of the RBI-SEBI Standing Technical Committee on Exchange Traded Currency Futures, released by RBI & SEBI on May 29, 2008,” said a BSE release

4. Higher risk weight attached to home loans under Basel II norms could discourage banks from pursuing aggressive lending policies, according to a recent report released by Fitch Ratings.
Risk weight on housing loans is based on the loan/value ratio (LTV) and could increase from 50-75 per cent to 100 per cent for LTVs above 75 per cent as per the Basel II norms. LTV is the percentage of the loan against the value of the house. The Basel II guidelines do not specify whether the LTV calculations should be done on an ongoing basis or at the point of disbursing the loan. The report suggests that the LTV calculations should be done on an ongoing basis, especially during periods of falling prices. According to the report, the differential risk weighting on different asset classes under Basel II could help guide the proportion and direction of bank lending, such as lending to higher rated corporates or hedging exposures to small-scale industries with permitted collaterals and guarantees.

5. Lakshmi Vilas Bank (LVB) expects 50 per cent growth in credit, the bank’s Managing Director, Mr V.S. Reddy, told Business Line today.Mr Reddy said the bank’s advances portfolio stood at Rs 3,900 crore at the end of last year. LVB intends to grow this book to Rs 6,000 crore in the current year, he said.Asked if this rapid scale-up might not affect the quality of assets, Mr Reddy replied in the negative. He said the bank would focus on corporate accounts, where the bank could lend at rates between 12 and 13 per cent and secure a reasonable margin.He said the average yield on advances is expected to grow from 11.1 per cent to 11.8 per cent this year.

6. Punjab & Sind Bank (PSB) may soon be able to tap the capital market through an initial public offering (IPO) at a reasonable premium, with the Union Cabinet on Friday giving its nod for restructuring its equity capital. The additional capital, after the equity rejig, would help the bank expand its business in compliance with Basel-II requirements and also improve its financial position. PSB is entirely owned by the Union Government.

7. Even as the Government is gearing up to disburse the first tranche of farm loan reimbursement by September 30, banks are facing a new problem, which could delay the entire process.Under the current guidelines, banks are not allowed to get any reimbursement until the final claims list is audited by a central statutory auditor. But the fees for the statutory auditors are huge and banks will have to pay before they get the money from the Government. And the audit may also take time, said a banker.The Indian Banks’ Association has taken up the issue with the Government as well as the Reserve Bank of India after it was discussed at its management committee meeting on July 29, said an official from IBA.ccording to the RBI guidelines, banks have to get 20 per cent of the accounts audited by the central statutory auditors, in order to get the reimbursement. However, the RBI guidelines do not make any mention of auditors’ fees. According to an official from a leading public sector bank, some auditors are asking for fees as high as Rs 15-20 per account, which could run into large amounts for some banks.

8. The foreign exchange reserves fell by $1.13 billion to touch $305.474 billion for the week ended August 1, according to figures released by Reserve Bank of India’s Weekly Statistical Supplement. This is the third consecutive week that forex reserves have fallen. For the week ended July 25, the reserves had fallen by $504 million to $306.603 billion. In the week under review, foreign currency assets decreased by $1.65 billion to $295.216 billion. Foreign currency assets expressed in dollar terms include the effect of appreciation or depreciation of non-US currencies. A forex dealer attributed the decline in the reserves to depreciation in the euro and pound, leading to a revaluation effect.Gold increased by $527 million to $9.735 billion, while SDRs remained unchanged at $11 million. The reserve position in the IMF fell by $3 million to $512 million.

9. An RBI technical committee has suggested waiver of Securities Transaction Tax (STT) for trades in Interest Rate Futures. The committee, in its final report released on Friday, said to ensure symmetry between cash market in government securities and interest rate futures, as also imparting liquidity to the market, deals in interest rate futures be exempted from STT.
The committee has recommended that banks be permitted to take trading positions in interest rate futures, subjects to prudential regulations, including capital requirements. The committee also suggested that FIIs may be allowed to take long positions in the interest rate futures market, subject to the condition that the total gross exposure in the cash and the futures market does not exceed the extant maximum permissible cash market exposure limit.

10. Dr K. Ramakrishnan, who retired as Chairman and Managing Director of Andhra Bank, took over as the Chief Executive of Indian Banks’ Association on August 4, said a press release issued by the association

Tides of 7.08.2008

1. Two-wheeler finance has hit a roadblock as banks are pulling out their retail presence from dealerships. After Citibank, the country’s second largest bank ICICI is learnt to have dismantled staff from the retail counters, compelling the dealers to search for alternative modes to make finance available for their prospective customers. Enquiries at various dealerships in the city revealed that the bank had shut its shop at the showrooms. While ICICI Bank says that it is changing the model of its two-wheeler financing, dealers and industry officials view the step as a subtle way to sharply reduce their lending by limiting access to customers at the showrooms.
2. Hongkong & Shanghai Banking Corporation Ltd (HSBC) sees profit growth in its Indian operations moderating in percentage terms in calendar year 2008 on the back of some slowdown in retail credit due to hardening interest rates and difficult collection environment. “Our (Indian operations) profit before tax grew 24 per cent in January-June 2008. I see some moderation in profit growth (in percentage terms) for the entire 2008. Last year, we had high double-digit growth. In 2008, we expect double-digit growth, but not as high as last year,” Ms Naina Lal Kidwai, Country Head, India, HSBC.
3. The Federation of Indian Chambers of Commerce and Industry task force on non-banking financial companies (NBFCs) said that the sector should be treated at par with banks.It has recommended measures, including the setting up of a debt recovery tribunal, removing restrictions on overseas borrowings and on issuing hybrid financial instruments for meeting regulatory capital needs. “It is time that they (NBFCs) are not looked upon as weak links in the system and are given a regulatory treatment in keeping with that perception,” the former SBI Chairman, Mr M.S. Verma, who headed FICCI’s task force on NBFCs, said while releasing the panel’s report.
4. Union Bank of India and IndusInd Bank have hiked their prime lending rates by 75 basis points. This will lead to a hike in the interest rates of floating loans.Union Bank of India raised its benchmark prime lending rate to 14 per cent from 13.25 per cent with effect from August 8. IndusInd Bank raised its PLR to 17 per cent from 16.25 per cent. These are the latest among several banks that have increased prime lending rates, after the Reserve Bank of India increased key rates in the first quarter review of its annual Monetary Policy, last month.A press release from Union Bank of India here on Wednesday said the increase would impact advances with floating interest rate structure linked to BPLR. However, existing home loans will not be impacted by the hike. In order to encourage education loans, the bank has exempt education loans from the hike, the release said.In case of IndusInd Bank, all loans except those under the consumer finance division would be impacted by the hike, said a senior official from the bank.
5. Tamilnad Mercantile Bank (TMB) is setting up a separate overseas credit cell to ensure expedite quick delivery of credit to exporters. The cell, to be headed by an Assistant General Manager is being set up at the head office with the aim to double the clientele base in forex business.
6. In discussions with some shareholder groups , Lakshmi Vilas Bank agreed to withdraw its proposal for a Rs 250-crore Qualified Institutional Placement (QIP) issue. Sources told Business Line today that it was also agreed that after the Annual General Meeting on August 14, Lakshmi Vilas Bank will invite Federal Bank to take a seat on its board. Federal Bank has 4.99 per cent holding in LVB.This development is seen as the first step towards an eventual merger of LVB with Federal Bank, which has made no secret of its intention to take over LVB and a few other banks in the region. Federal Bank has 4.99 per cent in South Indian Bank and has recently bought a similar holding in Catholic Syrian Bank.The decision to withdraw the QIP was prompted by a representation made by one Mr K.R. Pradeep, whose family and associates have 5 per cent stake in LVB.
7. For banks that hoped to make their balance sheets presentable in the second quarter, the Reserve Bank of India has quietly slipped a spanner in the works.Most banks had hoped to convert their weak bottom lines into profits, by writing back provisions on non-performing loans. Bankers had hoped to offset losses on the large depreciation provided on their investment portfolios in the first quarter, by writing back provision on overdue farm sector non-performing assets. Post-farm loan waiver, these advances had ceased to be NPAs though the payment from the government will be over three years. The total farm loan waiver package is about Rs 72,000 crore. The entire compensation payout is expected to be completed only by July 2011. The RBI in a notification on July 30 mandated that banks would not be allowed to write back the provisions made on the overdue farm loans. Instead, the RBI’s notification said that the write-back of the provisions would be permitted only after full settlement of the waiver scheme. This was because a provision represented a permanent loss to the bank’s balance sheet on account of delayed cash flows.
8. To have an “area approach” for targeted and focused banking, the Lead Bank Scheme (LBS) was introduced in 1969, based on the recommendations of the Gadgil Study Group. The banker’s committee, headed by F. S. Nariman, concluded that districts would be the units for area approach and each district could be allotted to a particular bank which will perform the role of a Lead Bank. As a consortium leader, the Lead Bank would co-ordinate with government office s, banks and other stakeholders, undertake planning and formulation of Annual District Credit Plans through Block and District Consultative Committees and help in synergising all efforts to fulfil Plan priorities and district-specific requirements. The objectives of achieving 100 per cent financial inclusion, strengthening the microfinance and cooperative sector, and liberating the rural masses from the debt-trap, are possible only with a revitalised lead bank scheme, says VINOD R. RAO.
9. Standard Chartered Bank India has reported an 89 per cent jump in operating profit at $606 million in the first half of the calendar year 2008 from January to June, against $320 million in the corresponding period of the previous year. The bank now contributes 23.4 per cent of Standard Chartered Group’s global profit and is its second largest market next to Hong Kong.The results include the proceeds from the sale of the bank’s asset management business which contributed $146 million as well as a robust increase in income.Standard Chartered Bank had sold its mutual fund business to IDFC in March this year.Excluding the sale of the AMC, Standard Chartered Bank has seen a 44-per cent growth in profit at $460 million.
10. HDFC Bank is expecting a 35-per cent growth in its credit card portfolio this year despite concerns over the impact of increasing interest rates.“We are number one currently on an incremental basis in the issue of new credit cards and are very positive about this segment growth over next two years,” Mr Parag Rao, Head (Product, Portfolio & Service Delivery, Credit Cards) HDFC Bank, told Business Line over phone from Mumbai.As on date HDFC Bank has 4.2 million credit cards. The year-on-year growth for the last two years was about 35 per cent. “We are confident of maintaining it this year too,” Mr Rao said.Out of 4.2 million, 70 per cent of the cards are with the internal customers of the bank while the rest are in the open market base. On the strategy of the bank in its credit card business, the official said it would be an entry product after a savings account with the bank for many people.

1.08.2008

1. ICICI Bank and HDFC on Thursday hiked home loan rates by a massive 0.75 percentage points, moving quickly to preserve margins in the wake of RBI raising key interest rates. The hike from the top two home loan providers is the second in the space of one month. ICICI Bank hiked the floating reference rate (FRR) for consumer loans, which also includes home loans, to 14.25 from 13.5 per cent, with effect from July 31. HDFC’s adjustable rate home loans will be priced at a minimum of 11.75 per cent with effect from August 1. Its fixed rate remains unchanged at 14 per cent per annum.A 0.75 percentage point hike will mean customers on floating rate home loans will have to pay an additional EMI of Rs 51 per lakh on a 20-year term.

2. The gross non-performing assets (NPAs) in retail loans are set to increase to around 4 per cent by March 2009, from 2.7 per cent on March 31, 2007, said a report by rating agency Crisil.
This is on a retail asset base of Rs 5-5.5 lakh crore across banks. The report, released on Thursday, said that the segments most affected by the decline in asset quality are unsecured segments such as personal loans and credit receivables, as well as two-wheeler, commercial vehicle and used car loans. Delinquencies have increased across the retail portfolios of banks, non-banking financial companies (NBFCs) and housing finance companies (HFCs).

3. The rupee may have appreciated against the US dollar since July this year, but exporters are not taking forward cover, unlike in the past.The rupee has appreciated by about 2 per cent from Rs 43.21 on July 4 to Rs 42.49. Yet bankers said that most exporters remained reluctant to hedge their inward remittances. The reluctance to hedge was evident from the wide forward premia. Six month forward premium is currently at 6.10 per cent. During the corresponding period of last year, six month forward premium was 1.28 per cent, when exporters actually resorted to hedging their earnings.

4. Oriental Bank of Commerce has mopped up insurance premium worth Rs 2.51 crore in the first phase of insurance business in joint venture with HSBC Insurance Holdings Ltd and Canara Bank, according to Mr R. M. Sharma, General Manager of the bank in charge of eastern region. “Our target was to achieve Rs two crore worth premium and we have already exceeded it. This was made possible because of the co-operation of our field functionaries,” said Mr Sharma.According to Mr Sharma, the insurance joint venture would help boost the non-interest income of the bank. “This initiative should shore up our profitability and help increase our customer base to a great extent,” he said.

5.Federal Bank’s net profit increased by 1.81 per cent to Rs 68.15 crore for the quarter ended June 2008 compared to Rs 66.94 crore achieved during the corresponding quarter of the earlier fiscal.The marginal increase in net profit has been attributed to higher provisioning of Rs 131.79 crore towards depreciation on investments held in trading books.While the interest income increased 34.20 per cent to Rs 745.12 crore (Rs 555.22 crore), other incomes slipped 7.92 per cent to Rs 96.21 crore (Rs 104.48 crore). The operating profit was up 34.55 per cent to Rs 253.52 crore (Rs 188.43 crore).The growth in total income is said to be due to an increase in interest income in spite of a slip in trading income from securities and equity portfolios.

6. A month after increasing its PLR by 50 basis points to 16.5 per cent, YES Bank has taken the cue from the recent rate hike by the Reserve Bank of India to effect yet another hike of 50 bps from August 1. The PLR would now increase to 17 per cent.The bank has also proposed to increase the fixed deposit interest rate across varying tenors. Deposits maturing between 12 and 18 months would earn 25 bps more than the existing 9.75 per cent, and the rate of return for senior citizens has been revised to 10.5 per cent from August 1.Profit after tax increased 51 per cent to Rs 54.3 crore during the first quarter of the current fiscal compared to Rs 36 crore during the corresponding quarter of the earlier fiscal.

7. Central Bank of India has suffered a 39.6-per cent decline in its net profit to Rs 59.32 crore for the quarter ended June 30 from year-ago levels. The bank had netted a profit of Rs 98.35 crore during the first quarter of financial year 2008, it said in a filing to the Bombay Stock Exchange on Thursday. The total income rose 37.27 per cent to Rs 2,572.53 crore during the quarter from Rs 1,874.02 crore in the year-ago period. Income on investments was at Rs 611.8 crore and other income at Rs 161.2 crore as at the end of the June quarter. The capital adequacy ratio stood at 10.01 per cent.

8. The rising proportion of unsecured loans, increasing exposure to high-risk customers, spiralling interest rates and a decline in credit standards from 2004 to 2007 will result in more bad debt for the Indian banking sector, rating agency Crisil said today.

9. Riding on higher interest income, Punjab National Bank (PNB) on Wedesday reported a 20.6 per cent increase in net profit to Rs 512 crore during the first quarter of 2008-’09 compared with Rs 425 crore during the same quarter last year. The rise in profit was despite the bank taking a Rs 150-crore hit due to depreciation in the value of government securities.

10. The Manipal-headquartered Syndicate Bank, the 7th largest public sector lender (in terms of total business), today reported 60.18 per cent drop in its net profit at Rs 87.89 crore for the first quarter ended June 30, 2008 compared to the corresponding quarter last year.

Tides of 26.07.2008

1. Life Insurance Corporation of India (LIC) appears to have made some value buying in the last quarter, when many blue chips lost heavily from bear hammering. The Government-owned insurance company, which is a major player in the equity market, increased its stake in the Sensex stocks during April-June quarterLIC raised its stake in 22 Sensex companies, during the June quarter, according to a study on the Sensex companies’ public shareholding of more than 1 per cent.

2. Borrowing abroad doesn’t seem to be that attractive now for Indian companies. Data released by the Reserve Bank of India show that there has been a steep drop in the number of companies borrowing abroad as well as the amounts they borrowed outside during the first quarter of this fiscal.Eighty eight companies have borrowed nearly $4 billion (or about the equivalent of Rs 16,000 crore) through external commercial borrowings (ECBs) during April-June 2008. In the corresponding quarter of the previous fiscal, 195 companies had borrowed $8.5 billion abroad. And for the full fiscal, the amount borrowed abroad was about $31 billion.Asked about the reasons for the drop in external commercial borrowings, Mr V. Krishnaswamy, General Manager, Indian Overseas Bank, said, “Companies are probably prepaying some of their borrowings. Earlier there was a penalty for such prepayment but that has now been lifted. Secondly, with six month LIBOR (London Inter-bank offered rate — the benchmark rate for external borrowings) at about 3.4 per cent and a maximum spread of about 3.5 per cent over LIBOR for ECBs beyond 3 years, the borrowing cost is nearly 7 per cent.

3. Union Bank of India reported a flat net profit of Rs 228 crore for the quarter ended June 30, 2008, against Rs 225 crore in the same quarter last year. According to the bank, the profit would have been higher but for the sharp depreciation in its investment portfolio. The bank made a marked-to-market provision of Rs 339 crore on its bond portfolio for the quarter. Total deposits grew by 23 per cent, while advances grew by 19 per cent. Treasury income was substantially lower at about Rs 8 crore (Rs 34 crore).

4. The merger of State Bank of Saurashtra with the State Bank of India is likely to be completed in three months, said Mr O.P. Bhatt, Chairman, State Bank of India. He was speaking to reporters on the sidelines of the second RK Talwar Memorial Lecture. Mr Bhatt said that this merger would help the group understand the dynamics of the merger process.

5. Net bank credit increased by Rs 16,132 crore to touch Rs 24,08,579 crore for fortnight ended July 4, according to the Reserve Bank of India’s Weekly Statistical Supplement. The total bank credit comprised food credit, which increased by Rs 574 crore to touch Rs 50,721 crore and non-food credit, which increased by Rs 15,558 crore to touch Rs 23,57,859 crore.

6. Karnataka Bank Ltd has registered a decline of 60 per cent in net profit at Rs 20.70 crore in the first quarter of 2008-09 as against Rs 51.79 crore in the corresponding period of the previous fiscal. Speaking to Business Line, after the board meeting here on Friday, Mr Ananthakrishna, Chairman and Chief Executive Officer, attributed the fall to the provision for depreciation in investments. The bank provided around Rs 101 crore for this. It has an investment portfolio of around Rs 6,000 crore, he said. The net interest income stood at Rs 140.78 crore (Rs 124.4 crore), a growth of 13.16 per cent. Other income stood at Rs 49.83 crore (Rs 41.78 crore).

7. Karur Vysya Bank’s net profit slipped to Rs 30.54 crore during the first quarter of the current fiscal, against Rs 47.95 crore during the corresponding quarter of the previous fiscal.
The bank has attributed the drop to the Rs 49-crore provisions made towards depreciation on investment in Government securities. Besides this, the bank has also made provisions for non-performing assets and other provisions as per the RBI guidelines. “But this is less than Rs 1 crore,” a bank official told Business Line.The operating profit rose by 20.72 per cent to Rs 79.95 crore (Rs 66.23 crore). The total interest income during the quarter increased by 28 per cent to Rs 327.67 crore (Rs 256.18 crore) and the interest on advances grew 31.15 per cent to Rs 253.93 crore (Rs 193.62 crore). Other income stood at Rs 48.73 crore.The bank’s total business increased to Rs 23,032.23 crore (Rs 17,212.76 crore), with deposits accounting for Rs 13,145.18 crore (Rs 9,998.40 crore) and the remaining Rs 9,887.05 crore (Rs 7,214.36 crore) for advances.

8. Aided by an increase in interest income, IndusInd Bank’s net profit increased to Rs 19.10 crore in the first quarter of 2008-09, up 44.48 per cent, from Rs 13.22 crore in the previous year’s corresponding quarter.For the period under review, the bank’s net interest income grew by 79 per cent to Rs 102.80 crore due to re-pricing of loan books and reduction in cost of deposits.

9. After a marginal rise last week, the country’s foreign currency reserves fell by a huge $1.413 billion to touch $307.107 billion, during the week ended July 18, according to the Reserve Bank of India’s Weekly Statistical Supplement. In the previous week, forex reserves had increased by $123 million to $308.520 billion. The fall in reserves is probably because the RBI was selling dollars directly to oil companies, in exchange for oil bonds, said a senior treasury official with a public sector bank. The week under consideration also saw very little FII inflow, which is also reflected in the lower reserves, he said.

10. If you receive an unsolicited credit card, you can now make your bank pay for the inconvenience caused to you. The bank issuing the card will not only have to pay a penalty to the Reserve Bank of India, but also offer monetary compensation to the customer.
The RBI on Thursday issued a circular, which lists out a series of dos and don’ts about the protocol that will have to be maintained in the case of credit cards.The circular says that if an unsolicited card is issued , activated and billed for without the consent of the customer, the card issuing bank will not only have to reverse the charges, but also pay a penalty amounting to twice the value of the charges reversed.Additionally, help is also at hand from the banking ombudsman who will determine the amount of compensation payable for the loss of the complainant’s time, expenses incurred, harassment and the mental anguish suffered by him.The bank will also be held responsible if a card is misused before it reaches the customer. “It is clarified that any loss

arising out of misuse of such unsolicited cards will be the responsibility of the card issuing bank only,” the RBI said.Foreign currency assets fell by $1.415 billion to touch $ 297.371 billion. Foreign currency assets expressed in dollar terms include the effect of an appreciation or depreciation of non-US currencies, such as euro, sterling and yen. The week under review saw the euro depreciating from $1.5857 to $1.5838. According to figures from SEBI, the net FII inflow was just $5.4 million during the week. Gold and SDRs were unchanged at $9.208 billion and $ 11 million respectively. The country’s position in the IMF increased by $2 million to touch $517 million.

Tides of 14.07.2008

1. Axis Bank’s net profit increased 88.6 per cent at Rs 330.14 crore in the first quarter ended June 30, 2008 compared with Rs 175 crore in the corresponding quarter of previous fiscal year. The total business grew by 44 per cent to Rs 1, 13,660 crore.

2. IFCI’s top management on Monday said that the idea of inducting a strategic investor in the company had not been abandoned. It was, however, made clear that any such process could begin only after the issue on ‘convertibile debentures’ was sorted out. The earlier process, initiated in October 2006, for inducting a strategic investor, cannot be revived from where it was left as both the market as well as the company’s condition had substantially changed ever , an official said.

3. Profits will be under pressure in the first quarter due to treasury losses on account of rising bond yields, said Mr M. V. Nair, Chairman and Managing Director, Union Bank of India. “It will not be possible to register the kind of profit growth we had seen earlier. Marked-to-market losses will affect profits,” he said on the sidelines of a press conference to announce a joint venture for asset management, here on Monday.Given the current high interest scenario, banks’ margins will be under pressure, Mr Nair said. Union Bank may find it difficult to maintain the 25 per cent growth in profit for the 2008-09 fiscal, as targeted earlier, he added.

4. Several loan-seekers from banks are finding themselves in a tricky situation as they are being asked to go in for an insurance policy to enhance the ‘chances’ of loan approval. The policy is on the life of the borrower against accident and other risks.The sale of insurance by banks is seen more in the case of those banks that have an insurance arm of their own or that are marketing the products of an insurance provider, according to sources. While some see reason in taking an insurance cover, , others feel they are being ‘coerced’ into it by banks — this is against the norms set by Insurance Regulatory and Development Authority .

5. The cooperative credit institutions, covering state cooperative banks, district central cooperative banks and primary agricultural credit societies, are upset at the decision of the National Bank for Agriculture & Rural Development (Nabard) to charge nine per cent rate of interest on the liquidity support to these institutions. This is much higher than what senior Nabard officials had earlier promised to charge, say sources close to cooperative credit institutions.

6. Stock Holding Corporation of India (SHCIL) has entered into a pan India arrangement with IDBI Bank to provide services for issue of stamp certificates and collection of money on its behalf as Authorised Collection Centre. According to a press release issued on Monday, IDBI Bank is the first bank to have an all India tie- up as an Authorised Collection Centre (ACC) for e-Stamping system with SHCIL. SHCIL has established e-Stamping system in Gujarat, Karnataka, National Capital Territory of Delhi and is also in the process of implementing e-Stamping system in Maharashtra where an agreement has already been executed with the State government.

7. Operational risk has always been an important component of risk faced by banks, but a widespread movement to isolate this began only a few years back with a plan by the Basel Committee on Banking Supervision to include specific capital allocation for operational risk in its updated Basel Capital Accord, commonly referred to as Basel II. As per Basel II, operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

8. Mr Ananthakrishna, Chairman and Chief Executive Officer of Karnataka Bank Ltd, will step into his ninth year in office on July 13. A bank release said here that he has broken the record of late Mr K. Soorynanarayana Adiga who was the bank’s full-time Chairman for eight years.

9. Andhra Bank is offering a special deposit scheme, AB Excel – II. As per the scheme, 9.75 per cent interest would be offered on deposits for 400 days. For senior citizens, an additional interest of 0.50 per cent would be given. The scheme is valid up to July 31.

10.Exchange-traded currency futures will become a reality in the Indian market in the next three-to-four weeks. “Work is in progress and we should be able to launch it by mid-August or latest by end of that month,” a Securities and Exchange Board of India (SEBI) official said. The SEBI Board had in June approved the policy as well as regulatory framework for establishment of exchange-traded currency futures. SEBI would take care of the operational part and the SEBI Chairman, Mr C.B. Bhave, has been authorised to decide on the exchanges that could trade this product, sources added. The stock exchanges have already been invited to apply for trading currency futures.

Tides of 5.06.2008

1. Bank officials should be sensitised about the guidelines and instructions that have been issued for determining who the eligible farmers are for the debt waiver scheme, the Finance Minister, Mr P Chidambaram, told the three Kolkata- based public sector banks in a videoconference on Wednesday.Mr Chidambaram listed a few actions points for compliance while directing the three banks – United Bank of India, UCO Bank and Allahabad Bank, to implement the agricultural debt waiver and debt relief scheme by June 30.

2. Syndicate Bank has taken up the implementation of the debt waiver scheme on a war footing.
At the special State Level Bankers Committee meeting here , Syndicate Bank's Executive Director, Mr George Joseph, called on all the member banks in Karnataka to finalise the scheme before the end of the month. He said that the impact of the debt waiver scheme on Syndicate Bank was estimated at Rs 1,000 crore.

3. Kotak Mahindra Bank will open 76 new branches in 2008-09,taking the total number of branches to 250. Of the existing 184 branches, 33 are in Gujarat where the number would go up to 45 branches across 22 districts and 34 locations by end of this fiscal, Mr K.V.S. Manian, Group Head, Retail Liabilities and Branch Banking, told reporters here, after inaugurating the bank’s first full-fledged branch in Gandhinagar.

4.If you hold ICICI Bank’s credit card and prefer to make the monthly payment in cash, just hold on. The bank has imposed a fee of Rs 100 for credit cards payments made in cash with effect from June 1. ICICI Bank has about 9 million cards in the market and commands a 33% market share in the card industry.As everybody may not be willing to pay in cheques, the new rule is boundto cause lot of inconvenience for card holders, say some customers.

5. Sahara India Financial Corporation (SIFCL), the largest deposit-taking non-banking finance company in the country, has been barred by the Reserve Bank of India from accepting public deposits with immediate effect.The company has also been told to repay the existing deposits as and when they mature.

6. Around Rs 2,000 crore of high cost deposits with Vijaya Bank, carrying an average interest rate of 9.6 per cent, are maturing this month and the bank is going to say ‘no’ to any renewal requests.“We will not renew any of those deposits at a rate more than 8.5 per cent,” the bank’s Chairman and Managing Director, Mr Prakash P. Mallya, told Business Line.Around a fourth of the bank’s Rs 48,000-crore deposits are ‘high-cost’. This would come down to 18 per cent by March 2009, he said. High cost deposits were raised in the last few years so as to be armed with adequate resources to seize lending opportunities.

7. Union Bank of India has commenced farm loan waiver programme on a war-footing which is set to be completed by June-end in the country, Mr M.V. Nair, Chairman and Managing Director, said here on Monday. The bank is covering 5.50 lakh farmers to implement the measures announced by the Centre during this fiscal year’s Union Budget.

8. HSBC India has reported a 41 per cent increase in net profit in 2007-08 at Rs 1,192 crore, against Rs 846 crore in the previous year.“The rise in net profit has been driven by robust growth in all our businesses. In particular, our SME as well as large corporate businesses have begun to deliver,” said Ms Naina Lal Kidwai, Group General Manager and Country Head, HSBC India.The bank’s total income rose 50 per cent to Rs 7,096 crore, from Rs 4,720 crore in the year ago period. Total expenditure jumped 52 per cent to Rs 5903 crore, against Rs 3,875 crore. Provisions and contingencies increased to Rs 1,742 crore, from Rs 1,077 crore.

9. State Bank of Hyderabad has launched agricultural relief scheme as part of the agricultural loan waiver announced in the Union Budget. As part of the launch, Mr P.K. Panda, Chief General Manager, SBH, interacted with the farmers at Cheeryal branch, Ranga Reddy district on Tuesday and explained them about the waiver scheme. The small and marginal farmers who had availed themselves of agricultural loans prior to March 31, 2007 which were over due as on December 31, 07 and still outstanding as on February 29, 2008 were eligible for waiver under the scheme, he said. In case of other farmers, 25% of the over due loan amount or Rs 20,000 whichever is higher is eligible for relief provided the borrower repays the 75 %.of the outstanding loan.

10. Corporation Bank is planning to set up business verticals such as corporate credit, retail and SME, which will help to focus better on growth, the Chairman and Managing Director, Mr B. Sambamurthy, has said.Speaking at an analyst meet here on Tuesday, he said the SME vertical will be based in Pune and the corporate credit vertical will be based in Mumbai, for closer interaction with customers.

Tides of 25.05.2008

1. Stung by protests from farmers, politicians and even a section of its own employees, State Bank of India on Wednesday hurriedly withdrew its controversial decision to suspend financing of farm equipment, primarily tractor loans. “We regret that our circular dated May 16, 2008, concerning tractor loans has been misunderstood and has given rise to concern. The circular is withdrawn with immediate effect,” SBI Chairman OP Bhatt said in a statement.SBI, the largest bank in the country, had issued a circular to its branches asking them to stop disbursals for new tractor loans, citing a spike in bad loans in this segment. The decision sparked criticism and protest from political parties, farmers' groups and industries, especially tranctor manufacturers, that could be hit by any slowdown in lending to farm sector. Anup Banerjee, a deputy managing director at SBI, said the circular has created some misunderstanding among the people.

2. Debit cards, instant like cash but seen as safer than credit cards, are turning into an aggressive mode of payment for e-commerce transactions. As many as 7,000 online transactions are being done on an average every day through debit cards, echoing a global trend.

3. Following the announcement of the Agricultural Debt Waiver and Debt Relief Scheme by the Union Government today, banks have started collecting details about the loans disbursed and the eligible borrowers. As per the scheme, banks have to display the list of the eligible borrowers in their branches by June 30 and issue eligibility certificates as soon as possible. This will make it possible for farmers to borrow fresh loans for the next season, starting July.Banks will also have to post one or more grievance redressal officers in their branches.

4. Punjab National Bank on Friday said that it does not envisage any problems in the implementation of the farm debt waiver and debt relief scheme announced by the Government.
“The guidelines issued on Friday have removed all doubts and are sufficiently clear. Imlementation of the scheme by June 30 should not be a problem,” said Dr K.C. Chakrabarty, Chairman and Managing Director of the bank, told Business Line.

5. The country’s foreign exchange reserves increased by $1.381 billion to touch $314.081 billion for the week ended May 16, 2008, according to the RBI’s Weekly Statistical Supplement.
This is the second week in a row that forex reserves have increased. In the previous week, the reserves had increased by $200 million to $312.7 billion.During the week under review, foreign currency assets increased by $1.342 billion to $304.118 billion, primarily due to a currency revaluation effect. The dollar was steady to weak, against the euro, during that week.

6. Concentrating on its core business without compromising on margins helped City Union Bank (CUB) post a 42 per cent increase in profits at Rs 102 crore for the fiscal ended March 31, Mr S. Balasubramanian, Chairman, said today. He said the bank had given a consistent performance on all parameters and its fee-based income had also grown to Rs 62 crs from Rs 38 crs in 2006-07.

7. The net profit of Federal Bank has registered an increase of 25.73 per cent touching Rs 368.05 crore as on March 31, as against Rs 292.73 crore achieved in the previous year.

8. LIC is eyeing at more than doubling its income from rented building property in the eastern zone to an estimated Rs 50 crore in the next two years. The rental income from LIC’s buildings has increased almost four-fold over the last five years and next year itself the earnings may reach the Rs 30-crore mark, he said. The Corporation had earned Rs 22 crore this financial year from its properties.LIC has almost 187 property documents in the eastern Zone comprising West Bengal and the states of North East, each property document consisting on an average of four-five buildings. In Kolkata alone, there are 81 buildings under LIC’s ownership including five heritage buildings.

9. Doha Bank is gearing up for a big splash in India—it intends to pick up stakes in Indian banks, strengthen its recently-acquired stock and commodity broking company, set up a non-banking finance company, an asset management company and get into non-life insurance business.
“We have a cash surplus of $800 million,” says Mr Raghavan Seetharaman, Group CEO, Doha Bank, adding “we are looking at acquisitions globally.”

10. Canara Bank has received the ‘best bank’ award from Kerala’s Kudumbasree Mission for 2007-08.The award is in recognition of the bank’s performance in areas of poverty eradication and housing development for the poorer sections of the society in the State, according to a release from the bank.The bank has been ranked first for the ‘Bhavanasree’ micro-housing scheme of Kudumbasree and the Poverty Eradication Mission of the State Government. The bank disbursed loans worth Rs 508 lakh under the category to the members of the Kudumbasree’s community-based organisations.

Tides of 18.05.2008

1. Punjab National Bank registered posted over two-fold jump in net profit to Rs 544 crore for the fourth quarter ended March 31 on the back of better recovery and improved margin. The bank had a net profit of Rs 238 crore in the fourth quarter of 2006-07. The total income of the bank rose to Rs 4,417 crore for the fiscal ended March 31, up by 19 per cent, from Rs 3,713 crore in the year-ago period.Besides, improvement in net interest margin, the sharp rise in the profit is also due to the fact bank has changed the accounting policy and have written back provisions in excess of Rs 500 crore on account of pension liability, which was provided in the first three quarters. However, to replenish the pension liability, the bank has made provisions from reserve under the new accounting policy. And in turn also revalued some of the fixed assets such as building of the bank.

2. Minister of state for communications and information technology Jyotiraditya Scindia has urged Finance Minister P Chidambaram to raise interest rates on post-office savings schemes to make them more attractive investment instruments.“Unless interest rates of small savings schemes are revised upwards, there may not be any change in the present situation due to which post office small savings schemes will keep losing their attractiveness rapidly,” Scindia said in a letter written to Chidambaram last week.A study carried out by Associated Chambers of Commerce and Industry (Assocham) has showed that total receipts under the small saving schemes during the financial year 2006-07 were worth Rs. 1,37,560 crore against Rs. 1,73,283 crore in the previous year. This was much lower than total saving bank deposits with commercial banks that stood at Rs. 6,55,274 crore at the end of 2006-07.“The main cause of concern is present interest rates due to which investors of these schemes are facing financial loss,” Scindia said.

3. The Export-Import Bank of the US (US Exim Bank) has set a target of granting $6 billion (over Rs 25,000 crore) through letters of credit (LoC) to Indian carriers for acquiring aircraft from US producers. The US Exim Bank provides credit assistance to projects against imports from the US. The loan values are tied directly to purchase of US goods and services.The bank is also offering pre-approved LoCs of $2.2 billion (over Rs 9,200 crore) to eight Indian financial institutions for onward lending against imports from the US. “Our commitments to aircraft purchases from India will rise in the future. We are planning to offer LoCs of $6 billion to airlines in India for buying aircraft from the US,” US Exim Bank Chairman and President James H Lambright said here today.

4. Citigroup Inc on Friday said it intends to shed $400 billion of assets over the next two to three years, in a drive to become more efficient. In slides posted on the largest U.S. bank's web site, Citigroup said it has about $500 billion of "legacy assets." It said it expects to reduce this amount to less than $100 billion within two to three years.Citigroup also said it is targeting annual net revenue growth of 10 percent from core operations. It said this includes increases of 7 percent from card operations, 8 percent from consumer banking, 9 percent from both securities and banking and from wealth management, and 14 percent from transaction services.

5. The financial crisis in the US is taking a toll on India’s infrastructure funding. The much-hyped India Infrastructure Initiative, which was announced by the government in February last year, has hit a roadblock with US-based private equity company Blackstone, a key sponsor of the programme, backing out. The Central government’s plan involved creating a $5-billion corpus for infrastructure funding through a collaboration between Citigroup and Blackstone from the US and Infrastructure Development Finance Company Ltd (IDFC) and India Infrastructure Finance Company Ltd (IIFCL) from New Delhi.About $3 billion of this was to be channelled as debt assistance to infrastructure projects, while rest would take the equity route.

6. The country’s foreign exchange reserves rose by $200 million to $312.7 billion for the week ended May 9, according to the RBI’s Weekly Statistical Supplement.In the previous week, the reserves had fallen by $371 million to $312.5 billion.During the week under review, foreign currency assets increased by $200 million to $302.776 billion, primarily due to a currency revaluation effect.Foreign currency assets expressed in US dollar terms include the effect of appreciation or depreciation of non-US currencies (such as euro, sterling, yen) held in reserves. The euro and the yen were weak against the dollar, during the week in question.Gold and SDRs remained unchanged at $9.427 billion and $18 million, respectively. The country’s reserve position in the IMF stood at $479 million.

7. Banks started charging a service fee of Rs 100 for every forex transaction of $10,000 and above and Rs 50 on transactions of less than $10,000 from May 16, following the notification by the government to levy service tax. Banks will now have to levy a service tax on this fee. A forex dealer with a public sector bank said that this was decided at a meeting organised by the Indian Banks’ Association, on Thursday.As per the government notification the service tax was to be levied on the gross value of the transaction, as there was no service charge. But this would have worked out to be very costly for banks, as the margins on the foreign currency transactions are not very high. So, banks have decided to charge a service fee and levy tax on that fee.
Typically, all inter-bank transactions are above $10,000. Only in case of customer transactions the amount may be lower, the bank official said.

8. A circular from ICICI Bank to its customers, informing the need to maintain a minimum quarterly average balance of Rs 10,000 in the savings account, effective from July 1, is felt to be discriminatory by the small retail investors in the city. The circular issued on April 7 informed the customers of the increase effected in the minimum quarterly average balance in the savings account from Rs 5,000 to Rs 10,000 and the need to maintain the same from July 1 onwards. Retail i nvestors registered with ICICI Direct.Com, who earlier were allowed to open 3-in-1 account for trading, banking and demat purposes, requiring a minimum balance of Rs 5,000 in their savings account, say the account, for them, has been mainly for trading and the proposed move is discriminatory.

9. Lakshmi Vilas Bank's `Technology Centre' was inaugurated in Chennai this morning by the Reserve Bank of India Regional Director, Mr F.R. Joseph. The centre is expected to be the nerve centre for the entire IT operations of the bank. It has online monitoring features for its network, applications and various production servers. Mr Joseph also launched the IP phone facility. The LVB Managing Director, Mr V.S. Reddy, said more technology- driven products would be unveiled soon.

10. Citigroup has no plans of exiting its consumer finance business in India even though there are bad debts, Mr Sanjay Nayar, CEO of Citi India, said.“We have a large portfolio in Citi Financial which offers finance to low and middle-income consumers. We are not exiting the business but there will be some repositioning, re-segmentation of some consumer base,” said Mr Nayar.

`Tides of 2.05.2008

1. Reserve Bank on Tuesday asked banks to review lending to traders of agri commodities and advances against warehouse receipts to ascertain finances are not being used for hoarding which can fan inflation."Right now we do not have any evidence. We have asked the banks to review their lending (to traders) so that we know that they are not taking undue advantage of bank finances," RBI Governor YV Reddy said at his customary post Annual Monetary Policy news conference.Through the review, the apex bank seeks to compare if there has been any significant rise in lending in these categories compared to that in previous years.
2. Bankers on Tuesday dubbed as "sensible" the marginal increase in statutory deposits - CRR - announced by RBI, saying the system had good liquidity but most of them would wait to decide on hiking lending rates."It is not my sense that interest rates should rise," market leader SBI said, while the largest private bank ICICI said it would "wait and watch" - a view shared by most of the bankers."Ultimately interest rates are subject to demand and supply. Liquidity is good... I would wait and watch," said KV Kamath, CEO and MD of ICICI Bank.HSBC India CEO Naina Lal Kidwai felt that "some banks might pass it on to the customers. HSBC would decide on its interest rates in about two-weeks."Bankers were unanimous that RBI's policy was aimed at balancing growth and containing inflation and would not hurt the industry much.

3. Unfazed by the downturn in recent IIP numbers, Mr K.V. Kamath, Chairman and Managing Director, ICICI Bank, who took over the CII President’s chair on Thursday, brushed off apprehensions of an impending slowdown in the manufacturing sector. Instead, for him, a definitive source of the situation on the ground were the quarterly results that companies put out and, what he terms, the “customer mood meter”. “I have never gone wrong with the mood meter in my last 12 years. When you meet ten customers and gather their mood, it tells you where we are going. I knew when Indian industry was coming under pressure in the 90s and when they were in dire situation in 2000 and 2001.

4. The fourth quarter of the last fiscal was a relatively lacklustre one for public sector banks.
For the 14 banks that have released their numbers, there has been an 11 per cent growth in profits. The picture might have been much worse but for the much higher profits posted by a few banks such as Bank of India and Corporation Bank. Lack of pricing power or the inability to pass on higher costs was visible.

5. Indian Bank, a public sector bank, plans to shed high-cost deposits of about Rs 2,000 crore during the first quarter of the current fiscal, its Chairman and Managing Director, Mr M.S. Sundara Rajan, has said. “Our endeavour would be to ensure that we don’t have any exposure to high-cost deposits in the coming days. We will come out of it this year. Repaying high-cost deposits will help protect my net interest margin.

6. A hike in CRR by 25 bps to 8.25 per cent in addition to the 50 bps hike announced a fortnight ago reiterates RBI’s continued focus on balancing inflation expectations through active liquidity management, says Mr Rana Kapoor, Managing Director & CEO, YES Bank. This is aimed to use liquidity management mechanism to anchor inflation expectations, while maintaining the growth momentum undisturbed by holding interest rates steady. Hardening inflation and moderating growth amidst global uncertainties spelt a tightrope walk for the RBI. It has once again managed to achieve a fine balance between inflation and growth objectives, he said. “The decision to wait for the impact of supply related initiatives by the Government and measures relating to the cash reserve ratio to pan out is prudent ,” he said.

Tides of 28.04.2008

1. ICICI Bank, India’s second largest bank, reported profits for the fourth quarter and for the financial year 2007. Net profits for the quarter ended March 31 was up by 39 per cent to Rs 1,150 crore and for the full year it was up 34 per cent at Rs 4,158 crore. The bank has also hiked the dividend payout to shareholders to 110 per cent (Rs 11 per equity share) from 100 per cent paid last year. However, growth in advances and deposits have not kept pace with the kind of increase shown in previous years.

2. HDFC Bank has posted about 37 per cent rise in net profit at Rs 471 crore for the quarter ended March 2008, which is in line with the market expectation. The bank announced an enhanced dividend of 85 per cent for 2007-08, against 70 per cent for the previous fiscal. “The results are in line with the market expectations in the key areas like revenue, profitability and margin. Though the market was expecting the bank to maintain net interest margin (NIM) at 4.3 per cent like it did in October-December 2007 quarter, it has actually improved the performance,” said Bhavesh Shah, Vice-President:Research of Asit C Mehta.

3. Oriental Bank of Commerce has reported a net loss of Rs 99.4 crore in the fourth quarter ending March 2008 as against a net profit of Rs 54.9 crore in the corresponding period of the previous year, largely on account of higher provisioning on account of merger of erstwhile Global Trust Bank. The bank was supposed to write off Rs 1225 crore of losses on account of merger of since 2005. It had already written off Rs 738 crroe till March 2007 and in 2007-08 it had written off balance Rs 487.72 crore, of which Rs 241.7 crore was slated for 2008-09. And large part of this – Rs 304 crore – was written off in fourth quarter, resulting into a net loss of Rs 99.4 crore.

4. The State Bank of India, India’s largest public sector bank, is likely to make a provision of Rs 40 crore in the quarter ending March 31, 2008, for potential losses in derivatives trading. The bank is expected to announce its fourth-quarter results on May 2. The bank's clients were likely to face Rs 700 crore losses in currency derivative trading for the year ended March 31, 2008, OP Bhatt, chairman SBI, told reporters in Mumbai on Wednesday. Indian companies took to buying forex derivative instruments to hedge against foreign currency exposure when the rupee started appreciating last year.

5. Polaris Software Labs plans to focus on tier–II banks this fiscal to improve margins. “The tier-I story is established. We would now like to look at tier-II,” said Mr Arun Jain, Chief Executive Officer of the company, in a conference call with analysts. There are 1,000 tier–II banks in the world and the company plans to look at this pool for new clients, he explained.“These banks are more secure than large banks when it comes to issues like sub-prime crisis,” he said. Working for them would mean Polaris would avoid being hit by the sub-prime crisis and associated risks. Currently, 10 of the top 20 large banks in the world, each with IT assets worth $5-10 billion, use Polaris’ Intellect banking suite of products. The company expects the product, which contributed 19.6 per cent to revenues for 2007-08, to make leeway into the tier-II segment this fiscal. “More and more product implementation will hold up our margins,” Mr Jain said.

6. Having hitherto concentrated on traditional industrial growth segments, State Bank of Mysore is now eyeing other potential growth areas for better reach.Its Managing Director, Mr P.P. Pattanayak, admitted that the bank neither had a strong presence here nor was its growth rate high. “We were all along concentrating on industrial hubs such as Erode, Tirupur, Avinashi and Salem. We now see this region (Coimbatore) growing rapidly, especially in the services space and have also perceived a strong need for banking services. We have therefore decided to offer and improve our services in this belt,” he said.

7. Talks for the 9th bipartite industry-level wage settlement between Indian Banks’ Association (IBA) and the bank unions will commence in Mumbai on May 5.The previous wage settlement, which was entered into in June 2005, lapsed on October 31, 2007. The 8th industry-level wage settlement was valid from June 2002 to October 31, 2007. If a new settlement is arrived at between the IBA and bank unions, it is expected to be valid for a five-year period from November 1, 2007. The first industry-level wage settlement was entered in 1966.

8. IDBI Bank reported a 15 per cent increase in net profit at Rs 245 crore for the fourth-quarter ended March 31, 2008, against Rs 214 crore in the corresponding quarter last year, due to higher interest income and fee income. The bank’s board has recommended a dividend of Rs 2 for the fiscal 2007-08.

9. Canara Bank has begun exploring foreign joint venture opportunities for its nine subsidiary companies. This follows the successful tie up with Robeco of Netherlands and HSBC for its asset management and life insurance business, respectively.The insurance business is expected to begin operations shortly. Speaking to journalists here on Saturday, the Canara Bank Chairman and Managing Director, Mr M.B.N. Rao, said, “We would like to unlock value in each of these subsidiaries.” The subsidiaries include Canbank Factoring Ltd.He said the bank had seamlessly migrated to the Basel II capital adequacy regime. The bank now intended putting in place advanced risk management architecture and for the purpose, plans to move into the advanced indicator approach, he said.

10. Canara Bank reported a net profit of Rs 1,565 crore or 10.15 per cent over the last financial year, and has recommended a dividend of 80 per cent to its shareholders. The bottom line growth was partly achieved by a cash recovery of Rs 1,030 crore this year. The bank also managed to contain its provisions for investment depreciation. The bank’s provisions were at Rs 1,054.37 crore, down from the previous financial year’s Rs 1,241.66 crore.

11. Aided by a sharp jump in treasury profits, better NPA management and a surge in core business operations, Corporation Bank on Saturday reported a 37.09 per cent rise in net profit for the financial year ended March 31, 2008 at Rs 734.99 crore against a net profit of Rs 536.14 crore in the previous year.For the period under review, the bank’s treasury profits (net of depreciation) were Rs 140 crore, which represented a 105 per cent increase over treasury profits of Rs 68 crore in 2006-07. In 2007-08, Corporation Bank provided a lower amount towards bad debts at Rs 123 crore (including agriculture) against Rs 186 crore allotted in the previous year. Moreover, the net interest income increased by 139.55 crore during the year ended March 2008, representing a 10.70 per cent increase.

12. Vijaya Bank is on track for meeting its September deadline for compliance with Basel II guidelines.Accordingly, the bank reported a 9 per cent growth in net profit for the financial year 2007-08 at Rs 361.26 crore and high provisions for depreciation on investments. The bank made a provision of Rs 272.12 crore for depreciation of its marked to market investments double the previous financial year’s figures. The bank also reported a dividend of 20 per cent.

Tides of 22.04.2008

1. Rabobank, the Netherlands-based financial institution, is planning to set up a $100 million private equity fund in India which will focus on the agriculture value chain. The plan to set up an agri-focussed fund is a logical extension of more than a century old tradition of backing the food and agribusiness by Rabobank.

2. Axis Bank today reported a 70.56 per cent increase in net profit during the fourth quarter of 2006-07 to Rs 361.4 crore mainly due to a steady rise in interest and fee income. The private bank announced a dividend of 60 per cent for the year ended March 2008. The diluted earnings per share (EPS) were at Rs 31.31 compared with Rs 22.79 at the end of March 2007. During 2007-08, the bank¡¯s net profit rose 62.52 per cent to Rs 1,071.03 crore as against Rs 659.03 crore during the previous financial year. The private bank ended the last financial year with a capital adequacy ratio of 13.73 per cent compared with 11.57 per cent in 2006-07. The increase in profits during the fourth quarter is despite non-tax provisions more than doubling to Rs 164.22 crore on account of provision of Rs 72 crore for mark-to-market losses on six derivatives transactions and a Rs 20 crore provision for depreciation in its credit-linked notes portfolio.

3. The liquidity in the system continued to remain surplus. The Reserve Bank of India absorbed around Rs 18,000 crore from the system. The hike in cash reserve ratio (CRR) comes into effect from April 26 and the system will thus remain in surplus mode till then, said a dealer. Call rates fell to a low of 2 per cent before closing the day at 5.75 per cent. The mutual funds are flush with funds and thus the collateralised borrowing and lending obligation (CBLO) rates fell to a low of 1.10 per cent. The government expenditure and the RBI’s intervention in buying dollars to stem the rupee appreciation are the major source of revenue for the markets.

4. The Reserve Bank of India (RBI) proposes to come out with prudential norms for reverse mortgage loans to safeguard banks in a falling real estate market. The prudential norms are likely to be announced in the forthcoming annual monetary policy of RBI on April 29. Reverse mortgage allows senior citizens with inadequate income sources to mortgage their own homes for a monthly stream of income for up to 15 years. It involves a senior citizen borrower mortgaging the house to a lender, who then makes periodic payments to the borrower during the latter’s lifetime. It is a way of monetising the owner’s equity in the house.

5. Karnataka Bank will take up the matter of bringing in a fresh investor at its next board meeting scheduled for April 24. The move comes on the back of the Reserve Bank of India (RBI) rejecting the Mangalore-based private sector lender’s proposal to rope in Washington-based International Finance Corporation (IFC) as an equity investor through a preferential allotment of shares.

6. tepid response to the Employee Stock Purchase Scheme (ESPS) has forced State Bank of India (SBI) to relax the one-year lock-in period norm under the scheme. After raising about Rs 17,000 crore through a rights issue, the country’s largest commercial bank had offered its shares to employees at a price of Rs 1,590 apiece. This was also the price for the rights issue. The number of shares that an employee is eligible for under ESPS is linked to his or her position in the bank hierarchy. Starting with 20 shares for award staff, entitlement rises to a maximum of 1,500 for the chairman.

7. State Bank of India (SBI) and ICICI Bank, the nation’s two biggest banks, will be worst hit by the central bank’s decision to increase the amount of cash they must hold with it, according to a Goldman Sachs Group report. The Reserve Bank of India (RBI) said on April 17 it would raise the cash reserve ratio (CRR) to tackle inflation, which is running at a three-year high. Banks, already facing slower loan growth with interest rates at the highest in six years, would see earnings and returns fall by 1 per cent to 2.7 per cent, the Goldman analyst said.

8. Axis Bank today said it has made provisions of Rs 71.97 crore during the fourth quarter of 2007-08 for six foreign exchange derivatives transactions that have been repudiated by two of its customers. While the bank has 188 derivatives transactions with an aggregate mark-to-market (MTM) loss of Rs 673.55 crore at the end of March 2008, there are six transactions where companies are not unwilling to honour the contract. Of the 188 deals, 113 are outstanding transactions dealing in foreign exchange derivatives where the aggregate MTM loss is Rs 547.72 crore.

9. Standard Chartered is poised for an expansion unprecedented in scale and one that will transform the bank by giving it a sizeable presence in the rural areas, including a consumer finance brand. Already the largest foreign bank in India, Standard Chartered has sought the Reserve Bank of India’s permission to open 100 rural branches, which are in addition to its annual plan of 40 new branches and 300 ATMs this year, which it has submitted to RBI for approval.

10. The Hyderabad High Court yesterday said that the ICICI Bank cannot treat as non-performing assets the amount of money Hyderabad-based NCS Sugars owes the bank on account of losses on foreign exchange derivatives. However, the court did not restrain the ICICI Bank from proceeding against NCS Sugars on other issues. The next hearing of the case NCS and ICICI Bank, which are locked in a legal dispute over losses incurred by the former on derivatives products, is scheduled for next week. When contacted, NCS Sugars executives declined to comment.