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 The circular is withdrawn with immediate effect,” SBI Chairman OP Bhatt said in a statement.SBI, the largest bank in the country, had issued a circular to its branches asking them to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.