Tides of 1.09.2015

1.  The RBI has designated State Bank of India and ICICI Bank as Domestic Systemically Important Banks (D-SIBs), which will put them under tougher monitoring to avoid any collapse. SIBs are perceived as banks that are ‘Too Big To Fail’. The RBI said the two banks have been selected due to their size, cross-jurisdictional activities, complexity, lack of substitutability and interconnectedness. SBI alone accounts for a fifth of the banking business in India. “The disorderly failure of these banks has the potential to cause significant disruption to the essential services they provide to the banking system, and in turn, to the overall economic activity. Therefore, the continued functioning of SIBs is critical for the uninterrupted availability of essential banking services to the real economy,” RBI said while announcing the framework for dealing with D-SIBs.Following their designation as D-SIBs, SBI and ICICI Bank must meet additional Common Equity Tier 1 (CET1) requirements from April 1, 2016, in a phased manner. The CET1 requirements will be fully effective from April 1, 2019. This means the banks will have to set aside more funds at a time when banks are battling a huge bad debt burden.The additional requirement as a percentage of Risk Weighted Assets (or loans) for SBI and ICICI Bank have been set at 0.60 per cent and 0.20 per cent, respectively. This will be in addition to the extra capital buffers already in place under Basel-III guidelines.Both banks said their capital base was higher than mandated. Arundhati Bhattacharya, Chairman, SBI, said, “SBI currently has a much higher level of Tier-I at 9.62 percent as opposed to 7 percent required under the current guidelines. We will adhere to the additional requirements as and when they become applicable.”Chanda Kochhar, MD and CEO, ICICI Bank, said, “ICICI Bank’s capital adequacy is well in excess of regulatory requirements and the Bank is not expected to require fresh equity capital for the next couple of years."If a foreign bank, having a presence in India, has been notified as Global Systemically Important Bank (G-SIB), it has to maintain the additional capital surcharge in India, proportionate to its Risk-Weighted Assets in India. HSBC, JP Morgan Chase, Barclays and BNP Paribas are among the G-SIBs in India as per the Financial Stability Board’s list of November 2014.

2.  Amid the slow credit offtake and lowering cost of funds in the banking system, HDFC Bank — the country’s second-largest private bank — slashed its base rate, or minimum lending rate, by a sharp 35 basis points to 9.35 per cent, effective September 1.This could set off a rate cut war among lenders to retain customers. HDFC Bank’s new base rate will be the lowest in the banking industry.Among public sector banks, Canara Bank also cut its base rate by 10 bps to 9.9%, effective September 3.

3.  At present, the base rate of country’s largest lender State Bank of India and ICICI Bank, the country’s largest private bank, are at 9.70 per cent each.

4.  Backed by strong macro fundamentals, the Finance Ministry on Monday pitched for a rating upgrade with global agency Standard & Poor’s (S&P). Currently, India has a rating of ‘BBB -’ with a stable outlook. Chief Economic Advisor Arvind Subramanian made a presentation to the team from the rating agency, comprising Paul Gruenwald, Managing Director & Chief Economist (Asia Pacific), and Kryan Curry Director (Sovereign & International Ratings). According to sources, during the presentation, the agency was told that inflation, the fiscal deficit, and current account deficit (CAD) are under control. “India has strong medium-term growth potential and therefore is exceptionally placed globally and reforms are persistent, cumulative, and creating an impact. Growth in the current fiscal will be better than fiscal 2015,” the CEA said in the presentation.

5.  JP Morgan Chase, the largest bank in the US, has an asset size of about $2,500 billion, which is nearly six times that of SBI’s. The lending operations of Indian banks are also much lower than that of their global peers.

6.  Industrial and Commercial Bank of China, has a loan book that is nearly seven times that of SBI’s.

Tides of 30.08.2015

1.  Four public sector banks have slipped in their compliance levels to ‘average’ from ‘above average’ owing to a missing boss. Without naming the banks, AC Mahajan, Chairman, Banking Codes and Standards Board of India (BCSBI), said: “Four banks have dropped in their extent of compliance…All are public sector banks. It shows also because there was no top boss. Although marginal, the banks have dropped on compliance on transparency & information dissemination.” BCSBI is an independent body tasked with monitoring and ensuring that banks adhere to the banking codes and standards adopted by them in the true spirit while delivering their services. According to a survey done in February, Mahajan said, “The compliance levels have improved from 50% in 2009 to 78.3% in 2015. It has been the lowest in transparency (76.7 %) and the highest in customer feedback (88%).” The survey will be in public domain after it is submitted to the RBI and banks. Last year, the RBI had received 85,000 customer complaints through the banking ombudsman. The single largest category of complaints, at 29%, has been on banks’ compliance levels, followed by grievances pertaining to ATMs and credit cards.The problems need to be corrected in public sector banks. The foreign banks are strong with their online mechanism and are performing the best. Some private and public banks are also doing well. Besides periodic revision of the Codes, the BCSBI undertakes thematic customer-centric studies, such as pertaining to retail loans, and banking services, among others, based on which it rates the banks. In the survey conducted by 100 retired RBI and bank officials, BCSBI sought feedback from about 4,100 customers from over 2,100 branches of 47 banks. It rates banks on five parameters — information dissemination, transparency, customer centricity, grievance redressal and customer feedback. Bank customers suffer from mis-selling of financial products, hidden charges, failure of customer service, no grievance redressal on fraudulent transactions or loss of ATM cards, among others.

2.  United Bank of India plans to bring down its gross non-performing assets to below Rs. 6,000 crs by the end of this fiscal. Gross NPAs for the quarter ending June 30, stood at Rs. 6,533 crs. The plan is to bring down gross NPAs to around 7.5-8 %. The bank’s current gross NPAs (as percentage of total advances) stands at 9.57%. The bank is also open to sale of sticky assets to asset reconstruction companies.

3.  Corporation Bank is striving to wean farmers away from money lenders by extending credit at affordable rates. Crop loans of up to Rs. 1 lakh are being extended to farmers, not necessarily for the crop but to pay off dues to money lenders.“Farmer suicides have been on the rise and we perceived that the best way to help the community is to free them from the clutches of money lenders. .It is across the country and not specific to any State or geography.

4.  The Reserve Bank of India said payment systems will not be operated on second and fourth Saturdays but would operate for the full day on working Saturdays. This move follows the Finance Ministry issuing a notification declaring that all scheduled and non-scheduled banks — public, private, foreign, cooperative, regional, rural and local area banks — will observe public holiday on second and fourth Saturdays from September 1 and will observe full working days on Saturdays other than second and fourth Saturdays. Payment systems typically include Real Time Gross Settlement (RTGS), National Electronic Fund Transfer (NEFT), Cheque Clearing operated by various Bankers' Clearing Houses in the country, including the grid-based Cheque Truncation System (CTS) and Electronic Clearing Service (ECS) suite, Regional Electronic Clearing Service (RECS) and National Electronic Clearing Service (NECS). Processing of future value dated transactions with value date falling on the second and fourth Saturdays will not be undertaken under RTGS and ECS suite. The financial market segments which are currently open for transactions on Saturdays will continue to remain open on all working Saturdays.

Tides of 22.08.2015

1.  The new payments banks are likely to impact commercial banks, say bankers. They echoed the fears expressed by Arundhati Bhattacharya, SBI Chairman, who felt that these new banks will pose a threat to the existing players with their ability to move money as well as compete for low-cost savings accounts. Terming it as a tricky game, N Kamakodi, CEO of City Union Bank, said that on the one side there are telecom companies that can virtually move currencies. On the other, some banks still have limitations in adopting technology.“While every customer of the bank has a mobile phone, not every individual has a bank account as yet. The last mile connect is still missing, but the mobile phone penetration is phenomenal,” he said.SR Bansal, CMD of Corporation Bank, said that the competition for savings bank portfolio, especially in the case of smaller-value accounts, will increase as far as public sector banks are concerned.

2.  The country’s largest lender SBI is “working on” its low-cost consumer touch points to take on payments banks.According to Arundhati Bhattacharya, Chairman, SBI, the bank intends to do this by strengthening the business correspondent (BC) model.The bank already has 56,000 business correspondents, and another 500 will be added to the unbanked gram panchayats in West Bengal soon.“The advantage which payments banks will have is lower cost of operations. So, we are also working on a low-cost model to increase our reach and compete with them,” she said on the sidelines of a Banking Conclave organised by FICCI.The RBI has granted 11 in-principle licences for payments banks, led by payment intermediaries, technology companies, mobile service providers and corporate entities.SBI has a 30% investment in the proposed payments bank to be launched by Reliance Industries.

3.  The All-India Bank Employees Association has criticised the RBI granting licence to private companies to open payments banks as a move to boost private sector banks at the cost of their public sector counterparts.AIBEA General Secretary Ch Venkatachalam said in a statement that the move would minimise the role of public sector banks and shrink their market share. In the name of banking reforms, he said, the government was trying to diminish the status of PSBs and boost private banks.“Because of the colossal private corporate delinquency, PSBs are saddled with huge bad loans of nearly Rs. 6 lakh crs,” Venkatachalam said. “All these are private corporate companies who had defaulted and it is strange that the RBI and the government want to encourage the very same private sector to start banks.”He pointed out that at the end of the last financial year there were 7,035 cases of wilful default involving bad loans of Rs. 58,792 crs. The top 30 borrowings from PSBs amounted to Rs. 1.21 lakh crs.

4.  The Institute for Development and Research in Banking Technology (IDRBT), an arm of the RBI, is conducting the first of its kind national competition to develop ‘apps’ for the banking and financial sector.Christened IDRBT Banking Application Contest (IBAC), the contest will be held in March 2016 at the IDRBT's premises here.“The competition is designed to enable development of application software to facilitate banking operations in the three broad areas of customers, managing business and managing technology,” the institute said in a release. Those intending to participate will have to register as a team of maximum three members. All members must be less than 25 years of age or affiliated to any recognised educational institution as a student. Any bank employee within the prescribed age limit can also try his/her luck. The last date for registration for IBAC is August 31, 2015.

Tides of 19.08.2015

1.  The venture capital being invested in Indian start-ups should be more balanced between foreign and domestic flows than it is right now, Minister of State for Finance Jayant Sinha said at the launch of two funding facilities by SIDBI. “The venture capital industry should be based in India,” he said. “Right now, 95 % of venture capital and private equity funding comes from outside India.”The Small Industries Development Bank of India (SIDBI) has announced the launch of its India Aspiration Fund — a fund of funds where the government will be an anchor investor in domestic venture capital funds — and the SIDBI Make in India Loan for Enterprises programme, that will provide loans on soft terms to small and medium enterprises.

2.  The State Bank of India has launched its mobile wallet — State Bank Buddy — in collaboration with Accenture and MasterCard. Customers of SBI as well other banks can download the mobile wallet application from Google Play Store and use it. It will allow users, among others, to send money to registered and new users, send reminders to settle dues, transfer additional cash into accounts of their choice free of cost, recharge and pay bills instantly, book movie tickets, flights and hotels, and shop. The mobile wallet app is available in 13 languages. The bank said the wallet will soon be available in the Apple App Store as well. B Sriram, MD, said State Bank Buddy is an online prepaid account which can be loaded for use when required.At a later stage it can also be linked to debit cards, bank accounts, etc. It will be a precursor to making mobile as the banking channel of choice.

3.  Banks have been speeding up loan sanctions and disbursals to borrowers in order to capture a larger share of the growing retail market.Major lenders, such as State Bank of India, ICICI Bank, HDFC Bank and Axis Bank have reduced their turnaround time to one day and, in some cases, to even as low as 10 seconds.Turnaround time is the time from the application of a loan by a customer till the final disbursal of the loan amount.A few months ago, giving digitised retail lending a push, HDFC Bank, the country’s second-largest private lender, had launched 10-second, almost real-time, loan approval and disbursement, with the customer only having to click/tap on his/her Net banking account.“It’s like having a real cheque in one’s virtual wallet…There is growing demand from digitally-savvy customers, to do away with paper work and to accelerate processes.

4.  Taking banking in India to the next level, ICICI Bank has  launched a new digital initiative — Smart Vault.Smart Vault is India’s first automated locker facility with high-end robotic technology. Launching this automated locker facility in the Capital, Chanda Kochhar, Managing Director and CEO, ICICI Bank, said this initiative marked a milestone in the Indian banking industry.This is because India has now joined a select group of countries that have access to the unique vault which uses state-of-the-art robotic technology.In this digital initiative, robotic technology is used to access the lockers from the safe vault. Customers get to conveniently access their lockers at any time of their preference, in the comfort of a secure lounge.Speaking to newspersons on the occasion, Kochhar highlighted that ICICI Bank had shaped the direction of technological progress in the banking industry and led the way in introducing path-breaking innovations, including internet, mobile, tab, touch banking branches, and banking on social media.The other important facet of the latest digital initiative is that ‘Smart Vault’ is an example of ‘Make in India’.Smart Vault has been both designed and manufactured by Indian partners, she said, adding that ICICI had (in 1990) provided seed funding to the company that designed the robotic arm. Pune-based Precision Automation & Robotics India had designed the robotic arm.

Tides of 16.08.2015

1.  The government has announced appointments of MD & CEOs for five more banks besides declaring the names of non-executive Chairmen in five banks. However, these appointments are subject to the outcome of a writ petition filed in the Supreme Court. The government’s move has raised questions over the rationale to make such announcements given the uncertainty.In a departure from tradition, at least four of those appointed in the latest round have come from the private sector. The Finance Ministry is also looking at allowing private sector candidates to laterally come into middle management roles. For Bank of Baroda, the non-executive Chairman and the Managing Director & CEO have come from the private sector.While PS Jayakumar, MD & CEO of VBHC Value Homes, has been appointed Managing Director and CEO, Ravi Venkatesan, an independent director at Infosys, has been appointed non-executive Chairman.Usha Ananthasubramanian, who is currently Chairperson of Bhartiya Mahila Bank, has been appointed MD & CEO of Punjab National Bank.In the case of Bank of India, MO Rego — who is currently Deputy MD at IDBI Bank — has been appointed MD and CEO of the public sector bank. And, G Padmanabhan, retired Executive Director of the Reserve Bank of India, has been appointed non-executive Chairman. For Canara Bank, the Centre has appointed Rakesh Sharma of Laxmi Vilas Bank, as the new MD & CEO. TN Manoharan, Director at Tech Mahindra’s public health foundation, has been appointed non-executive Chairman of Canara Bank. G Narayanan, retired Executive Director of Indian Overseas Bank, is the new non-executive Chairman of Vijaya Bank. TCV Subramanian, retired Chairman and Managing Director of Exim Bank, has been appointed the non-executive Chairman of Indian Bank. The Centre has also appointed Kishore Kharat Piraji, Executive Director at Union Bank of India, as Managing Director and CEO of IDBI Bank. The entire selection process for the top posts in the five major banks — Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank and IDBI Bank — has been transparent and based on merit. A three-stage screening was conducted for MD’s position, culminating in a final interview by three different panels. There are some vacancies of non-official directors on the board of PSBs and the selection process for these will be completed in the next three months. The selection of non-executive chairmen in the remaining six PSBs will also be completed in the next three months. The appointment of MDs and CEOs in two other banks will also be done as early as possible.

2.  The Kerala State Financial Enterprises (KSFE), a non-banking company fully-owned by the Kerala Government, has asked for regulatory approvals to expand its operations outside the State. It also needs some enabling provisions in other laws that will allow it to recover money lent to borrowers. Principally, it is awaiting nod from the Finance Ministry to enable it to use the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act for recoveries in its lending operations.For this, it will have to be notified as an institution of public interest. The matter is in an advanced stage of discussion with the Centre and the institution is hopeful of getting the necessary approvals soon. The Sarfaesi Act would empower KSFE to attach and auction the property of defaulters without having to go through an elaborate court procedure. In Kerala, it does not have a problem with recovery, since its dues enjoy the status of a revenue recovery, being an arm of the State Government. “With the Sarfaesi Act in place, we will be able to branch out and go outside Kerala,” P Rajendran, Managing Director, KSFE, said. This would enable the company to expand its branch network to 1,000 from the present 530 branches. Eyeing a 25-30 per cent annual growth, KSFE hopes to double its business to Rs. 50,000 crore in the next five years from Rs. 26,000 crore now, in the process becoming a one-stop financial supermarket.As part of these plans, KSFE will spread out and establish a presence in every panchayat as announced in the Budget presented two years ago, PT Jose, Chairman of KSFE, said.KSFE is currently serving about 15 lakh customers and there is enormous potential for further growth, he said.In the second phase of expansion, he said, KSFE will be rolling out white-label ATMs in almost all major urban and semi-urban branches. This will begin from January next year.The company is also in the process of developing a core software package suitable for chit operations in all the branches, which will be implemented from October, Jose said.

3.  State Bank of India is strengthening its presence in the SME space using information technology and digital tools, according to B Sriram, MD(National Banking Group). Addressing media persons at the opening of the 1,000{+t}{+h}branch in the Chennai Circle, a branch to meet the needs of high net worth individuals (HNIs), he said the bank is appointing relationship managers to facilitate interaction with SMEs.It is also using digital analytics to identify good customers and generate leads for risk-mitigation.Digital technology is helping the bank reach out better to smaller businesses. For instance, through its tie-up with Ola Cabs, the bank funds individual drivers who want to buy cars and join the Ola fleet. The loan repayments are made on a daily basis, with a portion of the fare in each trip going towards repaying the loan. This way, the bank also keeps a closer watch on its money, he said.

4.  Corporation Bank has signed an agreement with NCDEX e-Markets (NeML) and three warehouse service providers — LTC Commercial Company (P) Ltd, Navjyoti Commodity Management Services, and Kalyx Warehousing Pvt Ltd — for pledge finance through electronic mode.This facility will enable farmers and traders to use their goods or produce stored in the warehouses of approved warehouse service providers (WSPs) through e-pledge. E-pledge is a process by which any registered member, after depositing commodities in an NeML-accredited warehouse, can apply online to the bank to get finance against the electronic holding, said a press release from the bank.The empanelled WSPs act as collateral manager responsible for the commodity’s safety, stock management, insurance, deposit and delivery. NeML acts as the facilitator, bringing depositors, the WSP and the bank under one roof.

5.  Federal Bank has launched what it claims to be India’s first mobile app for opening a bank account.This mobile-phone-based account opening facility is an update to FedBook, an e-passbook app, which was launched two years ago.Anyone having an Aadhaar card and PAN card can now open a savings bank account instantly using a mobile phone.

6.  The new account can also be funded with an initial remittance not exceeding Rs. 10,000, a bank statement said.Download FedBook.To open an account, one has to download the FedBook on one’s mobile phone and follow two easy steps — take a selfie, and scan the Aadhaar and PAN cards.The App verifies the Aadhaar card in real time and opens the account on the click of a button.Once the account is opened, the app turns itself into the digital passbook for the customer.On Android, iOS.The app is currently available on Android and iOS phones and will soon be available on Windows and BlackBerry phones too.The app was launched simultaneously in Mumbai and Kochi.

7.  Govt launches mission 'Indradhanush' to revamp PSU banks. The government  would infuse Rs 20,088 crs into 13 PSU banks within a month's time with country's largest lender SBI cornering a hefty Rs 5,531 crs. "The proposals can help public sector banks effectively deal with the malaise of NPAs (non-performing assets), and potentially grow faster than our earlier estimate of 12 per cent annually till fiscal 2019," Crisil said in a statement.