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.
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.
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.
