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.