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.