Tides of 5.08.09

1. India will not go slow on financial sector reforms but its future response will take into account the impact of the global financial crisis.“There is speculation, apprehension that India may slow down on reforms. That is a mistake.“We will not slow down on reforms but will recalibrate our response to reflect lessons learnt from the crisis,” said the RBI Governor, Dr D. Subbarao, at a function here today.Economists said that the RBI Governor’s statement indicates that the opening up of the financial sector will depend on how the global and domestic scenario pans out and after the risks have been assessed.While implementing the financial sector reforms, the RBI will take into account the international developments, said Dr S. S. Tarapore, a former Deputy Governor of the RBI.
2. Trade and commerce on the Internet are suffering a slight hiccup now. The reason — cyber security for credit card payments just got a bit tighter since August 1. If you are among those who buy goods online, you’ll now have to do it after giving yourself an extra layer of protection — through the registration of a password with your bank.Typically, buying goods online involves giving details of your credit card including your name, your 16-digit credit card number, followed by a three-digit card verification value code (CVV) number given at the back of your credit card.Hitherto, you left yourself open to a possible fraudulent use of your card because both these numbers were visible on the card — and these could be noted down and (mis)used later. Now, that will not be possible.For the 25 million credit card holders in the country, the registered password offers an extra wall to secure their transactions without fear of someone misusing the card numbers.
3. Corporation Bank, in association with the UAE Exchange and Financial Services Ltd, has launched MoneyGram remittance service. According to a bank release, the facility has been launched at 300 branches in the first phase. Currently, Corporation Bank has a tie-up with 10 exchange houses in the Gulf for speed remittances and DD drawing. With the tie-up with MoneyGram, the NRIs can now send funds to India quickly, the release added.
4. Standard Chartered Bank’s Indian operations reported a 14 per cent rise in operating profit to $526 million, for the first half of 2009, from $460 million in the corresponding period last year.Income increased by 9 per cent to $904 million from $829 million last year.These income and profit figures are excluding the $146-million income the bank had from the sale of its asset management business last year.The share of Indian operations in the group’s profits, at 19 per cent, continued to be the second largest, after Hong Kong. Wholesale banking is the largest segment contributing over 90 per cent to the operating profit.
5. Bank unions have decided to go ahead with their two-day nationwide strike on August 6 and 7 after their bilateral talks with the Indian Banks’ Association (IBA) and the conciliatory talks under the aegis of the Chief Labour Commissioner failed on Tuesday.The talks failed after the IBA further pruned its wage increase offer to 13 per cent and also made it clear that it cannot offer the existing pension scheme to those public sector bank officers and employees who had in the mid-nineties opted for provident fund as their second retirement benefit, after gratuity.The United Forum of Bank Unions (UFBU), a representative body of nine unions, had urged the IBA to provide another option for about 3,00,000 employees to move from the provident fund scheme to the pension scheme.
6. Mr T.S. Narayanasami has been appointed Managing Director and CEO of United Stock Exchange, said a press release issued today.Prior to this Mr Narayanasami was Chairman and Managing Director of Bank of India and Chairman of Indian Banks’ Association. He has also been Chairman and Managing Director of Indian Overseas Bank and Andhra Bank, as well as Executive Director of Punjab National Bank.United Stock Exchange, an exchange for trading in financial derivatives, is promoted by 16 banks and financial institutions. These include both public sector and private sector institutions.
7. The civil aviation minister, Mr Praful Patel, on Tuesday said the government is planning to "corporatise" the state-run Airports Authority of India (AAI) and change it from an "authority" to a "company" that will be listed (on the stock exchange).Mr Patel said that this would be done by March 2010. He said that it would become easier for the AAI to arrange for funding for its modernisation projects, once it became a company.He said that an amendment would have to be made in the AAI Act for this.
8. British students completing their business and finance related courses are keen to gain work experience in companies based in India, according to the UK-India Business Council.Ten British students from various universities have begun their work experience with Indian companies on winning the UK-India Business Council (UKIBC) Scholarship Scheme 2009.
9. The Bank of America agreed to pay US regulators a $33-million fine for misleading its investors about billions of dollars in bonuses paid to Merrill Lynch executives when it acquired the investment bank.While seeking stockholder approval of the deal to acquire Merrill Lynch, the Bank of America said that Merrill would not pay year-end bonuses to its executives, the Securities and Exchange Commission said. But the bank had actually already reached a deal with Merrill Lynch that allowed it to pay $5.8 billion in bonuses.The SEC alleges that stockholders were misled when they were told no bonuses would be paid, while the companies had actually already agreed on a payment plan. This information must be disclosed under financial regulations.
10.An aggressive lending rate coupled with a high cost of deposits have seen the State Bank of India’s (SBI) retail business bleeding, probably for the first time ever, in the first quarter of this financial year.India’s largest public sector lender had announced a slew of home loans and auto loans at 8 per cent per annum while other banks still charged around 10 per cent.It had announced similar schemes for the SME sector to meet the needs of the SME units during the slowdown.“Retail is a resource intensive business and our term deposits portfolio has also grown at a higher rate. We should see this easing over the next couple of quarters as the cost of deposits goes down and that would ease the pressure on the retail operations too,” said a senior official at SBI.
11.Public sector Oriental Bank of Commerce (OBC) has launched on-line collection of central excise duty and service tax and has made the facility available in all branches.The new facility, launched by the bank's CMD Alok Misra on Saturday will be available in all branches of the bank with effect from August 1, a release said. "All customers having internet banking facility with the bank with transaction rights in any of the branches and are registered with Central Board of Excise and Customs by having an assessee number are eligible for making tax payment.
12.Delhi-based Punjab National Bank has registered a 62.4 per cent rise in net profit at Rs 832 crore in the April-June quarter of the current fiscal, compared with Rs 512 crore in the corresponding period of the previous fiscal. The increase in net profit is primarily due to various cost control measures, better administration and effective asset-liability management.The bank has already made a provision of Rs 150 crore towards wage revision.The bank’s net interest income (NII) surged 28.9 per cent to Rs 1,862 crore during the said quarter against Rs 1,445 crore in the same quarter last year.According to MV Tanksale, executive director, PNB, the banks posted the surge in profits despite “challenging market conditions”.Total income stood at Rs 6,178 crore during the April-June quarter, compared with Rs 4,595 crore in the corresponding period a year-ago. The bank’s advances for the fiscal year were likely to grow at 22.0 per cent, while net interest margins (NIM) could be at 3.5 per cent, Tanksale said.
The capital adequacy ratio of the bank was 14.5 per cent against 13.0 per cent at the end of June 2008.

Tides of 4.08.2009

1. Banks have begun derisking their investment portfolio. This is reflected in a sharp increase in medium and long-term yields.

Top bankers said that they were shifting their investment preference to short-term securities, including Treasury Bills. Currently, banks’ investment-deposit ratios are quite high — at over 30 per cent on a nominal basis and close to 90 per cent on an incremental basis. Banks are expected to invest only up to 24 per cent of their net demand and time liabilities in mandated SLR (statutory liquidity ratio) eligible Government securities.The diminished interest in long-term G-Secs is evident from the high spreads between one-year paper and 10-year paper. The spreads are currently about 245 basis points for five-year securities and 290 basis points (bps) for 10-year securities. The rising spreads, bank officials said, in turn implied that the Government would have to bear higher costs on its incremental borrowings for the rest of the year. This year, the Government’s revised gross borrowing target is Rs 4.51 lakh crore. Till last week, only about 44 per cent of the borrowing target has been met.

2.City Union Bank’s net profits for the first quarter of the current fiscal rose 20 per cent to Rs 31.55 crore. The growth in profits came on the back of a 24 per cent growth in interest income at Rs 228 crore. While advances grew 22 per cent to Rs 5,508 crore, deposits grew more robustly at 27 per cent to Rs 8,377 crore. A bank press release said that the net interest margin was at 2.36 per cent.

3. Two Deputy General Managers of Corporation Bank – Mr Kundapur Giridhar Shenoy and Mr B. Lakshmi Narayana – have been promoted as General Managers of the bank, says a bank release.
4. ICICI Lombard proposes to boost business from social sector schemes in view of the Union Government’s focus on financial inclusion.The company is targeting about 15 per cent of its revenue from government-sponsored insurance schemes for the poor in 2009-10, Mr Dilip Jashnani, Head, Financial Inclusion Group, ICICI Lombard, told Business Line. Last year, nearly 10 per cent of the company’s revenue of Rs 3,748 crore (calculated as gross written premiums) came from this segment.While the four public sector insurance companies continue to be the front-runners in the distribution of government-subsidised insurance schemes, private players are slowly catching up.
5.Interest rates may head up after December on the back of higher credit offtake, the Government's borrowing programme, infrastructure spending, and the consequent private participation, according to Mr Y. M. Deosthalee, Chief Financial Officer of Larsen & Toubro.Inflationary pressure, as a result of inflow of funds from overseas debt and equity investors, may also fuel an interest rate rise ."If inflows continue, there will be a pressure on the RBI to buy dollars. If that happens, they would have to release rupees, leading to inflationary pressure, resulting in interest rate increase. All indicators are towards an increase in interest rates," he said in an exclusive interview with Business Line.It may be noted that the RBI recently raised its Wholesale Price Index (WPI) forecast for end-March 2010 to five per cent from four per cent earlier, stating that global commodity prices have rebounded faster than the global economy.
6. Canara Bank has entered into a memorandum of understanding (MoU) with Crisil Ltd.The MoU envisages credit rating of the bank’s existing and prospective customers under micro, small and medium enterprise (MSME) sector for three years till March 31, 2012, or till the validity of the National Small Industries Corporation (NSIC) scheme.Under the MoU, the rating fee has been subsidised for small enterprises (including micro enterprises) registered with NSIC with a special discount to the bank’s clients.In respect of small enterprises not registered with NSIC and medium enterprises not eligible for the NSIC subsidy, the rating fee will be discounted.
7.The United Forum of Bank Unions (UFBU) may go on a follow-up indefinite strike if the Indian Banks’ Association (IBA) fails to expedite wage settlement talks, a senior office-bearer said.The apex body of nine trade unions has called for a strike on August 6 and 7.Talks between the IBA and the UFBU broke off two months ago on the issue of quantum of wage hike. While the UFBU demanded over 20 per cent increase in wages, the Association offered 17.5 per cent. However, the IBA, according to unions, later reduced its offer to 15 per cent at the Government’s behest.
8.Insurance institutes that train agents should self-regulate to maintain professionalism, said Mr A. Giridhar, Executive Director, Insurance Regulatory and Development Authority.Addressing a meeting of (All India) Insurance Training Institutes’ Association (ITIA) here, Mr Giridhar said the training institutes should also think of affiliating with reputed universities/institutions.The Authority is receiving complaints on lack of proper infrastructure in the training establishments and improper maintenance of schedules, he said.“Unless professionalism is achieved in training and in the way the agents are working, this channel will die a natural death,” he said.

IRDA is working on various measures to increase the efficiency of the agents, he added.

9. Axis Bank has opened its branch in Ramagundam in Karimnagar district of Andhra Pradesh on Monday. “This marks a yet another step towards our extensive consumer banking focus,” Mr KVSM Sudhakar, Senior Vice-President, Business Banking- South Zone, Axis Bank, said after inaugurating the branch. Axis Bank has a network of 875 branches, eight extension counters and 3763 ATMs across the country.
10. Gold loans are no longer just for people with limited funding options, says Mr Thomas Muthoot, Director, Muthoot Fincorp Ltd (MFL), a part of the Kerala-based diversified Muthoot Pappachan Group .Many small farmers and businessmen, even when they have other options for funding, prefer to avail themselves of gold loans, Mr Muthoot told Business Line in an interview.MFL was established with the purpose of integrating all group business interests of the parent group in the non-banking financial services sector. It has a network of over 433 branches across Kerala, Tamil Nadu, Karnataka, Maharashtra and Andhra Pradesh.MFL has also tied up with leading financial institutions to offer a host of other services ranging from general and life insurance, auto and home loans and money transfer to investment advisory.Rating agency ICRA recently assigned A1 rating to MFL’s Rs 500-million (Rs 50 crore) Commercial Paper (CP) programme.This is the highest credit quality rating assigned by ICRA to short-term debt instruments.

Tides of 3.05.2009

1. The country's largest lender, State Bank of India, on Saturday reduced deposit rates by 0.25 per cent on all tenures with effect from May 4.

2. The World Bank has approved $400 million additional financing loan to the Small Industries Development Bank of India, which is aimed at improving access to finance for Small and Medium Enterprises (SMEs).

3. Increasing consumer awareness on health, rising healthcare costs, drop in sales of new business for life insurance companies and the recent lifting of price controls in the non-life insurance industry have resulted in insurers focusing aggressively on health insurance to drive growth.

4. Banks and financial institutions may have to undertake an equity restructuring exercise for their downstream businesses following the reluctance of the department of industrial policy and promotion (DIPP) to tinker with the foreign direct investment norms announced in February.

5. Based on the results of recently concluded "stress tests," US regulators told Citigroup Inc and Bank of America Corp they may need to raise more capital, the Wall Street Journal said, citing people familiar with the situation.

6. Rajiv Malhotra regrets being a Citibank cardholder. A Citibank card customer for a decade, Malhotra was checking out from his hotel during a recent visit to China when he found that his cards had been blocked with no intimation for no fault of his.The stranded business consultant had cancel his onward flight and hotel reservations, and found that his card was blocked because of a bounced cheque on outstanding dues which was traced to a scanning error at IDBI bank, from whose account held by Malhotra’s wife the cheque had been drawn.Malhotra  had to cancel his onward flight tickets and onward hotel reservations. The cheque had been issued much before the due date.The customer moved the District Consumer Redressal Forum alleging harassment and was awarded over Rs 2 lakh as compensation on March 26 through order number DF (ND) 1091-1094

7. Oriental Bank of Commerce on Monday said it plans to raise Rs 1,000 crore during the current financial year from bonds to meet business growth."We have a headroom of Rs 4,361 crore, we would raise Rs 1,000 crore from Tier II bonds or perpetual bonds during the year," said OBC Chairman and Managing Director A K Misra.The fund would be raise to meet business growth and maintain Capital Adequacy Ratio over 12 per cent, he said.

8. Corporation Bank has proposed to issue upper tier II bonds for Rs 500 crore on private placement basis, the bank informed BSE. The annual coupon will be 8.25 per cent for first 10 years.

9. Concerns about rising bad loans have weighed on the stocks of most banks in recent months. The March numbers show that while new private banks have reported higher non-performing assets, PSU banks have actually seen a reduction in NPAs.

10. Section 80LA of the Income-Tax Act confers a 10-year tax holiday for banks located in Special Economic Zones (SEZs) with the first five years begetting them tax immunity on 100 per cent of such profits and the next five years on 50 per cent of such profits.

Tides of 30.04.2009

1.     1.  The banking sector stocks in India are catching investors' fancy fast. At a time when global banks are struggling to stay afloat, Indian banks have started to gain on the bourses.

2.       2. Indian corporates have raised $1.11 billion during March-more than double the mop-up in February-through external commercial borrowings both in automatic and approval route.

3.       3.Bank of India’s net profit grew by 7 per cent to Rs 810 crore, for the quarter ended March 31, 2009, from Rs 757 crore in the corresponding quarter last year.

4.       Canara Bank has slowed down its international branch expansion plans in view of the global financial turmoil. Addressing press persons here on Wednesday, the bank Chairman and Managing Director, Mr A.C. Mahajan, said, “We have approvals to open 10 branches, but we are going slow on our overseas expansion in view of the current situation”. Canara Bank currently has RBI approval to open branches in Johannesburg, Frankfurt, Muscat, Manama, QFC-Qatar, Leicester, New York, Sao Paulo, Dar-es-Salam and Tokyo. Referring to the bank’s results for the financial year 2008-09, Mr Mahajan said that the bank was able to record a robust 29 per cent growth in advances. As a result, it reported a growth in net profit by 32.4 per cent to Rs 2,072 crore in FY09. In the fourth quarter of FY09, the bank was able to grow its net profit by 54.9 per cent to Rs 719 crore.

5.    5. T  he net profit of Dhanalakshmi Bank has grown by 101 per cent to Rs 57.45 crore (Rs 28.46 crore) for the year 2008-09. The operating profit grew to Rs 87.90 crore (Rs 44.50 crore). Having surpassed its annual business targets by comfortable margins during the year, the level of business growth is a record in the bank’s history, a press release issued here said. Extending a special thrust to fee-based business, the bank was able to nurture non-interest income by 88 pe r cent, which was one of the principal drivers of the profit growth. There was significant growth in deposits and advances which have surpassed the banking industry average by far. 

6.       State Bank of Hyderabad’s (SBH) net profit declined 7.5 per cent at Rs 172 crore in the fourth quarter ended March 31, 2009 compared with Rs 186 crore in the corresponding quarter of the previous fiscal.This was due to provisioning of Rs 88 crore for salary hikes and pensions of the employees made during the quarter. The interest income, however, grew by 18.5 per cent at Rs 1,487 crore (Rs 1,255 crore).

7.       Led by an increased demand for bank loan ratings, rating agency Crisil’s standalone net profit for the fourth quarter ended March 31, 2009 rose almost 27 per cent, to Rs 36.43 crore from Rs 28.7 crore in the year-ago quarter.Its total income during the period went up 19.5 per cent to Rs 106 crore, from Rs 88.43 crore.“Revenue growth was driven by increased demand for bank loan ratings with around 500 new bank loan ratings announced during the quarter,” said Ms Roopa Kudva, Managing Director and Chief Executive Officer, Crisil.Total expenditure rose 20.6 per cent to Rs.63.34 crore (Rs.52.52 crore).

8.       8.Mr P. Vaidyanathan has assumed charge as part-time non-executive Chairman of City Union Bank. He will function in that position for two years. A chartered accountant by profession, Mr Vaidyanathan has been a member of the bank’s board between 1984 and 1992 and again from 2003. Mr Vaidyanathan is on the advisory committee and board of many institutions including the Disciplinary Action Committee of NSDL and SEBI-sponsored Investors Education and Protection Fund.

9.       State Bank of India has decided to reduce the interest rate on education loans, which will be sanctioned to students pursuing higher studies from May 2009 to September 2009, by up to 200 basis points.The bank said that interest rates on education loans (linked to the bank’s prime lending rate of 12.25 per cent) up to Rs 4 lakhs, above Rs 4 lakhs up to Rs 7.50 lakhs and above Rs 7.50 lakhs will stand reduced to 11.5 per cent (11.75 per cent now), 11.25 per cent (13.25 per cent) and 11 per cent (12.25 per cent) respectively.Girl students will get a concession of 0.50 per cent over and above the card rate. The lower rates are applicable for new loans sanctioned during the May 2009 to September 2009 period. For existing loans, however, the extant rates would continue.SBI extends loans up to Rs 10 lakhs for studies in India and Rs 20 lakhs for studies abroad.

10.   Central Bank of India’s net profit fell by 51 per cent to Rs 62 crore for the quarter ended March 31, 2009, from Rs 127 crore in the same period last year, due to lower interest income and higher provisioning.The bank had bulk deposits worth Rs 32,000 crore, which resulted in higher interest outgo, said Mr S. Sridhar, Chairman and Managing Director. Of this, the bank has shed deposits worth Rs 11,000 crore.High cost deposits pushed up the bank’s cost of funds to 6.9 per cent (6.27 per cent) and also put pressure on the net interest margin, which came down to 1.43 per cent (2.1 per cent).

Tides of 27.04.2009

1. While cash and banking stocks emerged as major parking slots for equity funds in March 2009, companies in the engineering and capital goods segment were among the biggest losers compared with the deployment of funds in March 2008.A sector-wise break-up of investment data by Plexus Management Services reveals that in actively managed open-ended equity funds (diversified, mid cap, tax plan, infrastructure, dynamic and theme fund) for March 2009, it is seen that the allocation into cash stands at 14.3 per cent from 7.4 per cent in March 2008.
2. ICICI bank, the country’s largest private sector bank that has been fighting bad loans and slowdown in loan growth, declared a dip in net profit that stood at Rs 3,758.13 crore at the end of March 2009, against Rs 4,157.73 crore at the end of 2008.The bank’s fourth-quarter profit too fell 35.3 per cent to Rs 743.76 crore at the end of the quarter ending March 2009, against Rs 1,149.84 crore at the end of the quarter ending March 2008. ICICI Bank’s non-performing advances rose from 1.5 per cent in March 2008 to 1.95 per cent in March 2009.
3. Donning the role of a commander ill-equipped to save the Titanic of the banking world, Citigroup’s India-born chief Vikram Pandit has found a place among the 20 worst-ever CEOs in American history. The top honour has gone to bankrupt Lehman Brothers’ Dick Fuld.The list of America’s 20 worst-ever CEOs, compiled by business magazine Conde Nast Portfolio after consulting with a panel of business school professors, identifies the business “leaders who helped drive their companies into the ground”. It includes “six men who helped make today’s economy stink”, the magazine said.
4. Home loans lender HDFC has no plans to lower its interest rates as of now, its top executive said."We have no plans to lower our interest rates as of now," HDFC's Chairman, Deepak Parekh, told reporters on the sidelines of a function here today.
He said that the Reserve Bank has pegged GDP growth rate for this fiscal at six per cent.
On inflation, Parekh said that the wholesale price index (WPI) was low whereas the consumer price index (CPI) was still high.
5. State Bank of India (SBI) on Wednesday said it would launch 700 branches in this financial year, a hundred less than half of last year.“We will add 700 more branches this year,” SBI Chairman O P Bhatt said.Last financial year, the bank had opened 1,600 branches.Of the 700 branches, many would be opened in rural areas, Bhatt said.
Like last year, this year the bank plans to reach out to 50,000 villages where there are no banking operations, he said.The reach out could be through an ATM machine or a point of sale, he said.The bank would like to raise about Rs 20,000 crore subject to government approval, he said.
6. State Bank of Travancore (SBT) has posted a net profit of Rs. 607.84 crore during 2008-09, the bank’s Managing Director A. K. Jagannathan announced here on Friday. At a press conference, he said the net profit was 57.43 per cent more than that in the previous year. In 2007-08, the net profit was Rs. 386.11 crore. The operating profit in 2008-09 was Rs. 1,056.27 crore, as compared to Rs. 709.09 crore in 2007-08. During the last quarter of 2008-09, which coincided with the unfolding phase of the global economic recession, the bank registered an increase of 29 per cent in net profit over the corresponding quarter of the previous year.The net profit during the quarter stood at Rs. 192.03 crore as against Rs. 149 crore. The higher profit was due to a rise in net interest income, which at Rs. 328.79 crore, was 31 per cent more than Rs. 250.43 crore recorded during the same period of the previous year. The directors have announced a dividend of Rs. 13 per share of Rs. 10 each for the year.
7. State Bank of Bikaner & Jaipur has recorded a business (deposits plus advances) growth of Rs. 9.885 crore during 2008-09 to reach a level of Rs. 69,312 crore. The operating profit recorded a growth of 35 per cent to reach Rs. 892.84 crore while the net profit increased by 28.1 per cent to Rs. 403.45 crore from Rs.315 crore in 2007-08. The directors have declared a dividend of Rs. 12 per share (face value of Rs.10), against 10 per share paid in the previous year.
8. Standard Chartered Bank has started the process to raise around Rs 5,000 crore through an Indian Depository Receipts (IDR) issue in the local markets. The bank has appointed JM Financial and UBS AG as lead managers for what could be the first IDR issue by a global player. Goldman Sachs, Bank of America and Kotak Mahindra are the other banks appointed to manage the issue.
9. Rising delinquencies and non-performing assets (NPAs) in the credit card business are forcing banks to reorient their outlook, from an aggressive sales strategy to inducting people who will focus on recovery and cleaning up the portfolio. As a result, the past year has seen all the four leading players in the credit card business replacing their chiefs. In March last year, T R Ramachandran, business manager (cards) of Citibank was shifted as head of the retail banking division. He was replaced by Sandeep Bhalla, who had experience in the cards business in the US, in May. In October, Ramachandran quit Citibank to become CEO of Aviva Life Insurance. Asked about the change, a Citibank spokesperson said in an emailed statement, “The last year has seen strong managers such as Sandeep Bhalla, Business Manager-Cards, and Harjeet Chopra, Country Risk Manager, join the India Consumer organisation from Citi overseas. Grooming senior managers who have experience across businesses, functions and geographies is critical to Citi's talent strategy and we take this task very seriously.”
10. State Bank of India has agreed to lend Vodafone-Essar, the joint venture between UK’s Vodafone and Essar, Rs 10,000 crore to finance the company’s entry into 3G (third generation) telecom services and expansion of its broadband operations. The five-year loan carries an interest rate of 13.25 per cent for the first two years; thereafter, it will be re-adjusted on the basis of the average prime lending rate of four public sector banks — SBI, Punjab National Bank, Canara Bank and Bank of Baroda, sources said.Banking sources said SBI had decided to down-sell Rs 7,000 crore to other banks and financial institutions and will retain an exposure of Rs 3,000 crore. The interest rate for the first two years is a percentage point above SBI’s benchmark prime lending rate.

Tides of 23.04.2009

1.Private sector lender Yes Bank today said its net profit rose 24.20 per cent to Rs 80.11 crore during the fourth quarter of FY09 despite an eight-fold increase in gross non-performing assets (NPA). Net interest income in the quarter rose 45.4 per cent to Rs 155.2 crore, as against Rs 160.7 crore in the year-ago period. However, its non-interest income declined 16.6 per cent, from Rs 107.6 crore in the quarter ended March 2008 to Rs 89.8 crore in the quarter under review. Gross NPAs rose to Rs 84.93 crore during the quarter, as against Rs 10.57 crore last year. As a proportion of advances, gross NPAs were estimated at 0.68 per cent at the end of 2008-09, as against 0.11 per cent in the corresponding period in the previous year. Higher gross NPAs have resulted in a 40.93 per cent increase in non-tax provisions to Rs 32.19 crore.

2. Shikha Sharma, who is likely to join Axis Bank in August, will have to start the search for at least two top-level executives soon after she takes over as the managing director and chief executive officer.Of the four internal contenders who were in the reckoning for the top job at the country’s third largest private sector lender, MM Agarwal, executive director for corporate and international banking, has already expressed his desire to leave the bank. Though V K Ramani, ED for technology and business processes, is unlikely to quit immediately, he is scheduled to retire by October-end.

3. Infrastructure Development Finance Company (IDFC), a non-banking finance company (NBFC), has revived its plan to enter the banking space.Sources close to the development told Business Standard that IDFC is hunting for a mid-size private sector bank that could lend the company a banking status through a share swap deal.A source close to the development said that IDFC, which has been trying to get a banking licence from the Reserve Bank of India (RBI) for over a year now, has appointed two investment banking firms — IDFC-SSKI and Kotak Mahindra Capital — as advisors for working out modalities on shortlisting a bank for a potential merger.

4. State Bank of Mysore (SBM), the Bangalore-based associate bank of SBI, is aiming at a growth of 30.9 per cent growth in its advances to Rs 33,880 crore and 29.3 per cent growth in deposits at Rs 41,888 crore for FY10 as compared to FY09.

5. There has been a sharp increase in the use of IT in banking services. The Reserve Bank of India devoted almost three pages to it in Annual Policy Statement for 2009-10, released on Tuesday. With the cellular user base expected to touch 600 million by 2010, the volume of pre-paid card recharging alone could exceed the $4-billion mark. Bharti Airtel launched its mobile payment services in June 2008 and has already got one million registered users. “mCommerce will be one of the top three services offered over mobile in the future,” said an Airtel spokesperson. International remittance is another service that operators are piloting in India.

6. HDFC Bank, the second largest private sector bank, has reduced the interest rates on deposits of some tenors by 25-35 basis points, with immediate effect.According to data on the bank’s Web site, the bank has cut the rates on deposits having maturity periods ranging from one year and up to eight years to 7.75 per cent.

7. The Reserve Bank of India has deferred the opening up of the banking sector for foreign players and decided to continue with the current policy and procedures governing the presence of foreign banks in India.In its Annual Policy Statement 2009-10, the RBI said, “In view of the current global financial market turmoil, there are uncertainties surrounding the financial strength of banks around the world. Further, the regulatory and supervisory policies at national and international levels are under review.”

8. Though banks are reluctant to cut rates, some will prune their deposit rates within a month; rates for certificate of deposit (CD) were already down on Tuesday. Lending rates could soften at a later stage. Payment of interest on savings bank account on a daily product basis, wef April 1, 2010 I: Savers will get more out of their savings account and banks’ total payout would be much more. So, if an investor parks Rs 2 lakh and withdraws it 2 days later, she will get interest for two days instead of the lowest balance between 10th and 30th of a month. This is similar to liquid schemes of mutual funds.

9.Kotak Mahindra bank plans to file a petition against the merger of the two companies before the Madras High Court on Thursday — a day ahead of the hearing of a string of petitions on the same issue, including those by Azim Premji’s Zash Investment and ICICI Venture. Meanwhile, the Madras High Court on Wednesday directed Subhiksha Trading Services to submit copies of balance sheets of the past three years and all accounts from April 2008 till date to the provisional liquidator (PL) appointed by the court. It gave the respondent 10 days to submit the same.

10. Banks' settlement with defaulting borrowers will now specifically exclude criminal cases lodged and proceedings with regard to criminality would continue even after the settlement of the civil cases, Indian Banks' Association (IBA) said on Thursday. The IBA decision comes against backdrop of two recent cases where the courts absolved the defaulting borrowers of any criminal wrongdoing who had entered into One Time Settlement (OTS) agreements with banks and where banks withdrew all charges against them.

Tides of 22.04.2009

1. The Reserve Bank of India on Tuesday cut key policy rates – repo and reverse repo – by 25 basis points each in order to push banks to lend more at viable rates and prop up the sagging economy.The underlying message from the banking regulator’s rate action was clear – banks should follow suit by reducing their lending and deposit rates in order ‘to support the return of the economy to a higher growth path’.The RBI, in its Annual Policy for 2009-10, reduced the reverse repo rate – the interest rate RBI pays to banks on the funds deployed with it – to 3.25 per cent (lower than the savings bank rate of 3.50 per cent) and the repo rate – the interest rate that banks pay on funds borrowed from RBI – to 4.75 per cent.
2. You can take a horse to water but can you make it drink? This is the question that the Reserve Bank of India has failed to answer in its Annual Policy Statement for 2009-10. In order to force banks to lend to entities other than itself, the RBI has reduced the reverse repo rate by 25 basis points to 3.25 per cent from 3.75 per cent. This will make it less profitable for banks to lend to the RBI. This, in turn, the RBI hopes, will force them to lend to private sector customers. The credit-deposit ratio has declined sharply from 74 to 71 per cent in four months. Says Prof Suresh Tendulkar, Chairman of the Prime Minister’s Economic Advisory Council, “How will they stay in business if they don’t lend?”
3. In a move that would allow banks to expand their ATM networks more easily, the Reserve Bank of India has done away with the requirement of prior regulatory approval for setting up offsite ATMs. These are standalone ATMs outside branch premises. RBI had earlier dispensed with the requirement of obtaining regulator permission for onsite ATMs (ATMs at branch premises). Currently, banks approach RBI for approval for setting up offsite ATMs. After making a medium-term plan about their requirements of branches and ATMs, banks approach the central bank for permission and proceed with setting them up after receiving the approval.
4. If you have a salary account/savings bank account in a bank, it is better if you withdraw money as per your requirements instead of at one go. From next April, the balance in your savings account will earn interest on a daily basis, following the Reserve Bank of India’s decision to implement new interest calculation methods on such accounts. The payment of interest on SB accounts (3.5 per cent at present) would be calculated on a daily product basis with effect from April 1, 2010. For Rs 1,000, you will get an annual interest of Rs 35 which will be divided into per day interest to be credited to one’s account.
5. All commercial banks were Basel-II compliant as on March 31, 2009, the Reserve Bank of India said. Initially the base approach of the Basel II framework had been adopted, the central bank said. As for the advanced approach to the Basel-II framework, the RBI said it had placed on its Web site a draft circular giving an indicative timeframe for implementation. The enhancement to current Basel-II framework by the international standard setting bodies will be considered for im plementation as appropriate, according to the RBI. These have been mentioned in an annexure, forming part of the annual policy statement, that spells out the Reserve Bank’s status on the recommendations of the G 20 working group on “Enhancing Sound Regulation and strengthening transparency”.
6. The Reserve Bank of India on Tuesday further eased norms for Indian companies to use their internal accruals for buy-back of their foreign currency convertible bonds, as corporate houses continue to queue up to buy back their foreign loans at a deep discount.In its Annual Statement of Monetary Policy, the central bank has proposed to increase the total amount of permissible buyback of FCCBs, out of internal accruals, from $50 million of the redemption value per company to $100 million. The central bank has linked the higher amount of buyback to larger discount.The RBI had begun to liberalise the buyback policy in December 2008. On March 13, 2009, RBI further liberalised the norms by extending the deadline for companies to complete the buyback by nine months from March 31, 2009 to December 31, 2009.
7. The Reserve Bank of India has decided to constitute a Working Group to review the present benchmark prime lending rate (BPLR) system and suggest changes to make credit pricing more transparent. The Working Group would consult all the stakeholders and submit its report by end-August 2009, the RBI said in its Annual Policy Statement 2009-10.Explaining the rationale behind the move, the RBI said that over time, the system of BPLR has lost its relevance as a meaningful reference rate as majority of loans sanctioned by banks are at rates below the BPLR.
8. ICICI Bank on Tuesday announced a 50 basis points cut in its corporate and retail lending rates with immediate effect. The bank also said it is cutting fixed deposit rates across various tenors by 25 to 50 basis points, with effect from April 24. ICICI Bank cut its Floating Reference Rate (FRR) for consumer loans, including home loans to 13.25 per cent from 13.75 per cent. All existing floating rate customers will be benefited by the reduction in the FRR.The bank also cut its Benchmark Advanced Rate, for its corporate customers, to 16.25 per cent from 16.75%.

Tides of 26.01.2009

1. Citigroup has sold government guaranteed bonds worth 12 billion dollars, which will help the beleaguered entity to boost its balance sheet. The Financial Times has reported that Vikram Pandit-led Citi has sold "$12 billion of government-guaranteed bonds, the largest issuance since the US authorities agreed to backstop financial companies' short-term debt in November".
Further, the daily noted that the issue surpasses a $10 billion offering by General Electric as the largest bond issue to be guaranteed by the Federal Deposit Insurance Corporation as part of the government's efforts to help the financial sector.Citi has posted losses for five consecutive quarters, with $8.29 billion of losses in the fourth quarter of last year alone.

2. A further cut in policy interest rates is expected when the Reserve Bank of India (RBI) conducts its third quarterly review of the monetary policy on Tuesday. A 50 basis point (100 basis points is 1 percentage point) cut in the rate at which the central bank provides overnight liquidity to banks (repo rate) as well as the rate at which it absorbs liquidity from banks is widely expected.RBI has the ability to lower policy rates since economic growth is slowing down, commodity prices are falling, and more cuts in fuel prices are on their way. “We expect the inflation rate to fall to around 2.9 per cent in March,” said Shailesh K Jha, senior regional economist, Barclays Capital.Namrata Padhye, economist, IDBI Gilts, seeks a wait and watch approach. “A gradual approach towards easing would ensure that no panic is created in markets over the outlook on domestic economy.”Since September 15, 2008, the RBI has eased policy rates by 350 basis points, but banks have reduced rates, grudgingly, by just 150-200 basis points.

3. The country's largest lender State Bank of India's net profit for the October-December quarter jumped by 52 per cent to Rs 3,713.66 crore. The bank had a consolidated net profit of Rs 2,442.32 crore in the December quarter last year, SBI said in a filing to the Bombay Stock Exchange.Total income rose to Rs 30,313.14 crore in the third quarter, from Rs 24,380.99 crore a year ago, a jump of 24 per cent.On a standalone basis, the bank recorded a net profit of Rs 2,478.42 crore during the quarter under review, whereas it had a net profit of Rs 1,808.64 crore in the same quarter a year ago.During the quarter, standalone total income stood at Rs 21,256 crore, while it was Rs 15,364 crore last fiscal.The interest income of the bank went up by 42 per cent at Rs 18,030 crore as against Rs 12,667 crore in the same quarter a year ago.

4. India's second largest lender and largest private lender, ICICI Bank, has posted a Rs 1,272.18 crore net profit for the quarter ended December 31, 2008, as compared to Rs 1,230 crore in the year ago period, showing a rise of 3.41 per cent. The total income of the bank during the quarter grew to Rs 10,351 crore against Rs 10,338 crore in the same period of 2007-08.

5. The central government and the Reserve Bank of India (RBI) will jointly work to chart out more stimulus packages for industry, Home Minister P Chidambaram said in Chennai Saturday.
"The country is facing only a slowdown and not a recession. Counter and corrective measures have to be taken to increase domestic demand," Chidambaram said.Launching the BYST Growth Fund promoted by Bharatiya Yuva Shakthi Trust (BYST), a charitable organisation that helps underprivileged youth set up businesses, the International Finance Corp (IFC), and private equity fund VenturEastthe, the former finance minister added that the government is taking fiscal measures while RBI is taking monetary measures for that purpose.

6. The Prime Minister's economic panel today said banks are currently not cutting lending rates much as their deposits rates are high, but hoped that they would slash rates gradually."They (banks) find themselves in a fix. Deposit rates have been raised and the lending rates cannot be reduced significantly immediately. So, I think that is the bind in which they are," Prime Minister's Economic Advisory Council Chairman Suresh Tendulkar told reporters in New Delhi.
He, however, said banks would gradually cut down interest rates.Tendulkar, however, refused to hazard any guess or make any prescription for RBI on interest rates in its forthcoming quarterly review of monetary policy slated for January 27."It is for RBI to take a call. I will not make any suggestion on that part," he said.

7. HDFC Bank and ICICI Bank that maintain salary accounts of Satyam employees said they were not holding any ‘fake’ accounts while Citibank declined to comment.The public prosecutor in the Satyam scam case alleged on Thursday that Satyam had as many as 13,000 fake salary accounts. Banks, however, maintained that there have been no irregularities in the know your customer (KYC) procedure and they do not have any fake accounts with them.“We have no salary account with any other bank,” a Satyam spokesperson said when asked whether there were more banks handling employees’ salaries.“There has been no irregularity at our end and we have done our due diligence,” said an official with one of the three banks who did not wish to be identified.

8. Andhra Bank expects an overall business growth of 23 per cent in the eastern region by the end of this fiscal. The bank has set a target of achieving a total business of Rs 3,140 crore in the region by March 2009, as against Rs 2,370 crore till December 31, 2008. The total business of the bank was Rs 95,770 crore till December 2008, and it expects to cross Rs 1,00,000 crore mark by the end of this fiscal, and Rs 1,50,000 crore by September 2010, said Ramakrishnan K S, zonal manager, Andhra Bank at a press conference in Kolkata on Saturday. The bank has taken several initiatives like to boost current account and saving accounts (CASA) deposits, which is nearly Rs 500 crore in the region. The bank has 23 branches in West Bengal, and has applied for licences with the Reserve Bank of India (RBI) to open additional four branches in the state.The bank also expects to have all its 1,410 branches under core banking solutions (CBS) by the end of this fiscal.

9. Chennai-based IndBank Merchant Banking Services, a subsidiary of Public-sector lender Indian Bank, is planning to open 30 branches and 200 terminals over the next 15-24 months. The bank is also planning to invest Rs 18 crore through equity once the market condition improves.Meanwhile IndBank has reported a net loss of Rs 0.97 crore during the third quarter ended December 31,2008 as compared to a profit of Rs 10 crore during the same period of the previous financial year.

10. The Centre along with the Reserve Bank of India (RBI) has extended credit to the tune of Rs 7,200 crore to Small Industries and Development Bank of India (Sidbi) for the development of the medium, small and micro enterprises (MSME) sector, which contributes 8 per cent to the country’s GDP and 40 per cent to the total exports.

Tides of 13.01.2009

1. With the easing of yields and the likelihood of a further fall, there has been a flurry of Tier-II and perpetual debt issuances by banks to raise capital. Most banks will be required to enhance or add up capital as they are likely to expand 25-30 per cent this fiscal. Also, with the deadline of March 31, 2009 for implementation of Basel II norms approaching, banks are looking to maintain a cushion in their levels of capital adequacy, said analysts. As inflation and interest rates were higher in the first two quarters, there were not many bond issuances. Therefore, the December-January period is seeing hectic activity in the bond market as banks rush to raise capital to avoid bunching up of issues towards the end of the fiscal. Some banks that are likely to come out with bond issues in the near future include Bank of India, Canara Bank, State Bank of India, IDBI Bank, Union Bank of India, Corporation Bank, Allahabad Bank and Bank of Baroda.

2. South Indian Bank’s net profit for the quarter ended December 2008 increased by 33 per cent to Rs 54.20 crore against Rs 40.72 crore for the corresponding quarter of the previous fiscal.The bank is targeting a net profit of Rs 190 crore this fiscal. It has achieved Rs 144.50 crore in the first three quarters. Though credit growth has been less compared with the earlier years, it has grown by 13 per cent year-on-year, its Managing Director and CEO, Dr V.A. Joseph, said. Out of the aggregate business of Rs 27,779 crore as at December 2008, advances accounted for Rs 11,340 crore (against Rs 10,020 crore as at end December 2007).

3. Having achieved a national footprint and scale of operations, ING aims to double its market share in the country’s financial services sector. Towards this, the company has been carrying out a series of marketing activities, including a television commercial.Currently, the market share of each of ING’s three businesses in India (banking, asset management and insurance) is between 1 and 2 per cent. ING’s business footprint is across tier 1, 2 and 3 cities. While the life insurance business is present in 232 cities, the bank is present in 300 cities.

4. In a further setback to the Indian IT sector, the World Bank made public it has barred Wipro Technologies and Megasoft Ltd since 2007 from receiving direct contracts under its corporate procurement program. The Bank said Wipro’s offer of American depository shares (ADS) to its staff as part of public offering in 2000 was against its policy and it banned the vendor till 2011.
The Bank made public the names of debarred companies on January 11 under the new disclosure policy, stating the “change (in policy) was in the interest of fairness and transparency.” Analysts said the Bank’s move could have been prompted by the Satyam episode.It banned Megasoft Ltd for four years from December 2007 for participating in a joint venture with Bank staff while working with the Bank. Earlier, it put a ban on Satyam currently in the news for Rs 7,000 crore accounting fraud.

5. If you have a health insurance policy with a cover below Rs 1 lakh, you may soon be able to enjoy portability of your policy from one insurance provider to another. The General Insurance Council (GIC), in a crucial meeting held recently, favoured the portability for policies below Rs 1 lakh and formal guidelines to this effect would be sent to the Insurance Regulatory and Development Authority (IRDA) soon, Mr M. Ramadoss, Chairman, Oriental Insurance Company and member of GIC, told Business Line. Under present norms, a policy holder is given health cover for a year which has to be renewed every year. If there is no claim, the policy-holder is entitled to a bonus in the form of an increased sum. In addition, the bonus gets accumulated for every claim-free year.

6. With the rate of inflation declining steadily in recent weeks to touch a 10-month low of 5.91 per cent (week ended December 27), there is possibly a smug feeling in New Delhi that the price situation is fully under control. The fact is it is not. International prices of an array of commodities have no doubt declined in the last four months. While global growth concerns have weakened the demand side, drying up of liquidity, rising inventories and exit of speculative capital have contributed to the poor price sentiment. Producers have promptly responded with output cuts — OPEC has cut crude output by as much as 4 million barrels a day. There is reason to believe that supply is declining faster than demand as a high rate of compliance on part of OPEC and continued disappointing non-OPEC production are more than offsetting demand weakness.

7. German Chancellor Angela Merkel's government is to hammer out a major new stimulus package this week for Europe's biggest economy but her fractious coalition is still divided on the details.

8. The government is looking at a plan to inject public funds into 40 or more regional banks, whose capital bases are being hurt by rising bad loans amid the financial crisis, the Mainichi newspaper reported on Wednesday.

9. ICICI Bank that pioneered 12-hour banking (8 am to 8 pm) in the country, is gradually cutting down its business hours in branches. After cutting down business hours at many of its branches by 3 hours from December, the bank has now decided to cut down business hours at all its branches on Saturdays. The second largest bank has decided to cut business hours at its branches on Saturdays to 5 hours, from 9 am to 2 pm.Decision to cut business hours on Saturdays will be effective from February 7, the bank said on its website.

10. Bankers to Maytas Infrastructure and Maytas Properties are reviewing their exposure to both the companies in view of the rise in risk. The fear is that project delays could result in guarantees being revoked.With growing controversies around the Ramalinga Raju family-promoted entities, banks will play safe”, said a top official of a public sector bank.State Bank of India, which has an exposure of less than Rs 500 crore, is reviewing all these accounts and sharing information with both the central government and the Reserve Bank of India to see if there is a need to take proactive action, SBI Chairman O P Bhatt said on the sidelines of 'Vibrant Gujarat’ in Ahmedabad On Monday.Bhatt, however,said there is no problem with the Maytas accounts and the entire exposure is collateralized. “No personal loans have been given to Raju and his sons,”.he said.Confirming the review of exposures, ICICI Bank said in a statement, “We are a banker to the company and are reviewing our exposure.” It, however, did not elaborate on the kind and the extent of its exposure.“We cannot comment on individual lending exposures. We will issue any disclosures if and when we assess that there is an impact that requires such disclosure”, India’s second largest lender said.