Tides of 14.04.2007

1. The High Powered Expert Committee (HPEC)headed by Mr Percy Mistry, a former World Bank economist, which included 15 top names in the financial sector released its report on making Mumbai an international financial centre. It got wide media coverage, though mixed. . As press reports suggested, Mr Chidambaram had high expectations from the report and spoke passionately in his Budget speech (2007-08) about Mumbai emerging a global financial centre.t is not the case that Mumbai does not have the potential to play a bigger role in international finance. The issue is over its current status and the ability of financial system to cope with the global market.Over time, Mumbai may truly be transformed into an IFC even as the economy touches higher levels and financial market deepens. It is equally important that the regulatory framework undergoes changes in tandem, both to facilitate this transformation and to shield it from the buffeting foreign winds.
2. Banks are continuing with the derisking of their investment portfolios despite the beginning of the lean season.Top bankers said that they have decided to continue with containing the average maturity of their respective investment portfolios of both government and non-government securities to about two years.The average maturity profile covers investments in both in held-to-maturity and in the marked-to-market categories. In the case of private sector banks, the average maturity profile is underone year.This move was largely in anticipation of further liquidity tightening in the weeks ahead.
3. The Finance Minister, Mr P. Chidambaram, has made good his budget speech promise to senior citizens. The National Housing Bank has come up with draft norms for reverse mortgage, an idea whose time the Finance Minister seems to think has come in India as well. Briefly, reverse mortgage enables a senior citizen sitting on a hot property to unlock its innate illiquid potential into a series of monthly or quarterly or even a lumpsum payment without any obligation to the lending financial institution during his lifetime. His/her inheritors would however have to pick up the tab, including the accrued interest lest the lending financial institution sells the property to settle the dues thus piled up by the senior citizen. Conceptually, reverse mortgage is a welfare measure reaching out to senior citizens who are either neglected by their wards or are too self-respecting to depend on them for financial support and sustenance.
4. LIC has registered a whopping growth of 118.6% in its first premium income in 2006-07 at Rs 39,541 crs against Rs 18,085 crs in the previous year. In the previous year-2005-06- the corporation had seen a growth of 48.6%. The corporation sold 3.82 crore new policies in the recently concluded fiscal against 3.15 crore policies in the previous year.
5. In keeping with the Budget proposals for developing an exchange-traded market for corporate bonds, the SEBI has permitted the BSE and the NSE to set up corporate bond trading platforms from July 1.The BSE and the NSE will make use of their existing infrastructure, with necessary modifications, for setting up these platforms.The platforms will be available from 10 a.m. to 5.30 p.m. on all trading days.To begin with, the trade matching platform will be order-driven, with essential features of the over-the-counter (OTC) market.
6. Increase in interest rates and the RBI's actions to reduce liquidity in the system will lead to a slowdown in credit growth.According to a ratings round-up by Crisil, banks will find it difficult to pass on the higher cost of funds as borrowers increasingly look at alternative sources, such as overseas borrowing and convertible bonds.Crisil believes the profitability of financial sector entities may be affected, going forward.
7. PNB haslaunched three new products and services including an innovative reverse mortgage scheme by the name `PNB Baghban' for senior citizens.The other two are
"Wealth Management Services' and a `Floating Rate Fixed Deposit Scheme.As part of the celebrations of its 113th Foundation Day, PNB has also opened 113 new outlets including 35 automated teller machines (ATM) and 18 new branches in various parts of the country.

Tides of 13.04.2007

1. The mutual fund industry has to focus more on retail clients to expand further, said Mr Mukul K. Gupta, Chief Executive Officer, Birla Sun Life Mutual Fund. Although the industry saw substantial growth over the past two years, most of the money came from the top 15 cities or so. With at least 10-15 asset management companies looking to set up shop in India over the next 12-15 months, the industry would see increased competition with the new players also concentrating on the existing centres; hence, there is a need for players to expand geographically especially in the retail space.

2. The Bombay Stock Exchange today said it has received expression of interest from 20 parties for picking up 41% stake in the exchange at a price of Rs 5,200 per share. The interested investors include domestic financial institutions, domestic corporate houses, high net worth individuals and foreign funds. SBI, the largest financial institution, is said to be one of the bidders. Earlier this year, BSE, which is the oldest exchange in the country, sold 10 per cent of its stake to the German exchange operator Deutsche Börse (5%) and Singapore Exchange Ltd (5%) for Rs 189 crs each at a price of Rs 5,200 per share.

3. Nabard will extend capital or equity support to micro-finance institutions through its Micro Finance Development and Equity Fund. It has sanctioned Rs 1 cr to three MFIs each. The new scheme will facilitate MFIs to leverage funds from commercial banks, donor agencies and others, and help provide a range of micro-financial services at affordable costs to the poor. The scheme aims at providing promotional, equity, capital and revolving fund assistance to banks, NGOs, SHG Promoting Institutions and MFIs.

4. The ubiquitous post office may, in the coming days, begin to offer home loan products, with the postal department looking to enter into distribution partnership with home loan major HDFC. They may also distribute non-life insurance and other annuity products of private insurance companies. The Postal department already has distribution partnerships with various organisations like Oriental Insurance, State Bank of India, among others.

5. Private life insurance companies are upset over the Pension Fund Regulatory and Development Authority (PFRDA) plan to go exclusively for public sector pension fund manager (PFM) to manage the new pension scheme (NPS). The process of selecting the three PFMs would soon get started and completed within eight weeks. Only public sector asset management companies would be allowed to participate in the bidding process. The three PFMs are expected to manage the contributions made to the NPS by the new recruits of the Central and State governments effective from April 1, 2004.

6. Union Bank of India has raised its benchmark prime-lending rate by 75 bps to 13.25% from 12.50 %, effective April 11. The bank had last raised its prime-lending rate in February 2007 to 12.50% from 12%.The hike in interest rates will impact advances with floating interest rates linked to BPLR but will not apply to the extant housing loans on a floating rate basis.

7. Bank of India has hiked its benchmark prime-lending rate by 75 bps to 13.25% (12.50%), effective April 13. "Certain categories of advances like agriculture and SME with limits up to Rs 10 lakh, existing home loans that are linked to BPLR, all educational loans existing and also the new ones will not be affected by this increase. It had last hiked its PLR in February by 50 bps.

8. An infrastructure project that requires bank finance can now delay production by a year from the scheduled date of completion. The loan will be treated as a substandard account if the delay is beyond a year. (Against 6 months earlier)Earlier infrastructure projects were given a six months extension. "If the date of commencement of commercial production extends beyond a period of one year after the date of completion of the project, as originally envisaged, the account should be treated as sub-standard. The revised instructions come into force with effect from March 31," said an RBI notification. Factors beyond the control of the promoters may lead to delays in project implementation and involve restructuring or re-schedulement of loans by banks.

9. With the government withdrawing the blanket pass-through taxation status of private equity(PE) funds based in the country, domestic funds appear to be rejigging their portfolios smartly. ICICI Venture made a partial exit from seven listed companies in its portfolio in on March 28, all through bulk deals with UBS Securities. The PE fund would have raised anywhere between Rs 150-200 crore through the partial exits. The new tax regulations governing the pass through status of PE funds came into effect from April 1.

Tides of 12.04.2007

1. The Securities and Exchange Board of India (SEBI) must be complimented for pioneering the idea of rating equity. Last year, SEBI ushered in an optional rating regime for IPOs. It has now removed the option, thus making the rating of IPOs mandatory.

2. Yes Bank has entered into a bancassurance partnership with Agriculture Insurance Company of India (AIC) for distribution of agriculture insurance products.

3. Public sector banks (PSBs) have begun pushing for a revision in the savings bank (SB) deposit rates in bid to curtail disintermediation of low-cost deposits. Banking sources said that this issue would be raised at the meeting between the Union Finance Minister, top honchos of PSBs and officials of the Reserve Bank of India (RBI) on April 19. Currently, only the savings bank deposit rate is administered by the RBI. This rate stands at 3.5%. Sources said the savings rate has remained low, despite the upward momentum in interest rates. In fact, some of the bankers said that the effective yield available to the savers was less than 3% on an annualised basis or less than half the annual inflation target of 5%.

4. Union Bank of India plans to ramp up its retail bullion business. The bank conducted a test run in October 2006 for gold coins and was a huge success. The bank plans to capitalise on the forthcoming festivals of Vishu and Akshaya Tritiya to formally roll out the business. It plans to market the coins through 100 select branches located in key residential and market areas.

5. ABN AMRO Bank has hiked the interest rate on fixed deposits to 10.25 % from 8 %, effective April 9. The revised rate will be applicable on deposits (minimum of Rs 10,000) with a tenor of 400 and 188 days. The bank has also increased the interest rate on 99-day deposits from 7.25% to 9.5%. The scheme is open to both existing and potential customers of the bank.

6. The All-India State Bank Officers' Federation is opposed to the proposal to merge the four subsidiaries in the SBI, "as it is a retrograde one which will lead to reduction in the number of branches and other undesirable effects."

7. Public sector banks are likely to take it easy this financial year. With the hardening of interest rates and the Reserve Bank of India’s clear indication to go slow on credit growth, banks may be forced to project lower targets for 2007-08. According to government sources, the finance ministry may accept modest projections. This is a major shift from the ministry’s stand in the last financial year when it did not allow banks to project lower targets in their statements of intent. Credit growth in 2006-07 was more than 30%, while deposits grew about 20%. But high inflation and the fear of the economy overheating have prompted the RBI to take stringent monetary measures that might impact growth too.

8. ICICI Bank, the largest lender to microfinance institutions (MFIs), is stepping up its direct term lending to meet the funding needs of MFIs until it resumes the flow of funds under the partnership model of micro lending.

9. Apnaloan.com, a online market portal for loan products, plans to add more services to its portfolio with a view to becoming a one-stop solution for potential loan seekers. The portal will soon venture into services like education loans, SME loans and risk-based products like health insurance and auto insurance.

10. Currently Apnaloan.com offers loan solutions, including personal loans, car loans, home loans and credit cards.

11. The Aga Khan Fund for Economic Development-promoted Development Credit Bank (DCB) is all set to go rural after achieving the priority sector lending target in 2007-08.. The Mumbai-based small private bank has been falling short of the requirement of having to lend 40 % of their total advances to priority sectors which include agriculture and home loans.

12. The growing Indo-China trade and a large retail market in the communist nation is enticing Indian banks to tap opportunities in the fastest growing economy. ICICI Bank, and Bank of Baroda are planning to scale up their operations in China. At present, ICICI Bank and Bank of Baroda have representative offices in China. ICICI Bank has a representative office in Shanghai since October 2003. ICICI Bank has applied to the RBI seeking its approval to upgrade its operations in China to a branch. Bank of Baroda expects to convert its representative office to a branch by July, subject to regulatory approvals. Public sector Bank of India has a branch presence in the special economic zone at Shenzhen in China.

13. The Kolkata-based Allahabad Bank’s credit portfolio jumped 41% in 2006-07, which also helped reduce its gross non-performing assets (NPAs).

Tides of 11.04 2007

1. The Indian Overseas Bank Officers' Association conducted a free medical camp in Delhi for the welfare of officers and their family members. The medical camp was organised on the occasion of the 40th year celebrations of the Association.

2. The proposal to collect 35% income tax from the co-operative banks will hit them hard and the Union Finance Minister should rethink it or at least reduce the burden on the banks, according to Mr P. Raghunadha Rao, Chairman of the Kanakamahalakshmi Co-operative Bank, here and the Vice-Chairman of the AP State Co-op Urban Banks' Federation Ltd.

3. Standard Chartered Bank (StanChart) will lead arrange India Infrastructure Finance Co’s (IIFCL) $500-mn external commercial borrowing (ECB) plan. The resources will be raised for a period of 10 years.

4. ICICI Bank has been fined HK$ 40,000 (Rs 2.2 lakh) by the Securities and Futures Commission (SFC), Hong Kong, for dealing in securities without a licence between June 15, 2004 and March 8, 2006. The bank has been allowed to maintain its banking licence in Hong Kong. The bank would also have to reimburse the investigation costs to the SFC.

5. Even as the RBI works on long-term plans to replace physical cheque clearing with electronic clearing its existing clearing capabilities are being put to severe tests by rising volumes. A surge in volumes is turning out to be too much for the clearing system to handle leading to delays. Since the beginning of the new financial year starting April 1, cheque volumes have nearly doubled. Now, do not be surprised if your banker takes an additional two-three days for clearing your cheques, given that he is faced with the issue of adjustment of volumes. On an average, sources at the RBI explained that the month of March saw an average of 6,75,000 cheques being processed on a daily basis. Now, as against this, the month of April has already seen average daily volumes rising to near 12 lakh cheques.

6. ICICI Bank and apparel discount chain Megamart joined hands to launch a co-branded credit card. The ICICI Bank Megamart co-branded credit card is a gold card with features like multiple reward points scheme that enable customers to earn six reward points for every Rs 200 spent at any Megamart outlets.

7. Standard Chartered Bank (StanChart) has picked up to 5% stakes in a few private sector banks, according to chief executive officer (India) Neeraj Swaroop. The CEO, however, did not disclose the details of such deals.

8. The Delhi High Court has asked the director of a private company to pay Rs five lakh towards payment of a loan to an advocate against whom she had issued three different cheques that bounced in January 2003.

9. It used to be that, for banks, only the colour of money was green. But no longer. Increasingly, banks are consciously lending to projects that are green (in the way they treat the environment), opening branches that are energy-efficient and environment-friendly and using recycled paper for printing cheque-books.

10. Pushing for consolidation in the banking industry, the finance ministry has asked the SBI to explore the possibility of merging its unlisted subsidiaries with itself, including State Bank of Hyderabad, State Bank Of Indore, State Bank of Patiala and State Bank of Saurashtra. This is because the government feels the process of merging an unlisted subsidiary would be easier. More so, since all the unlisted subsidiaries are wholly-owned by SBI, the process would be much faster even from the regulatory aspect.

11. The Reserve Bank’s efforts to squeeze out excess liquidity in the economy through hike in short-term interest rates is likely to impact quarterly earnings of banks and the rate, which is expected to remain slow in the first half of the current fiscal.

12. HDFC Bank was open to mergers and acquisitions, but it was not desperate as organic growth was fuelling its development healthily. It is open to acquisitions but given the healthy growth rate in the last few years, it is not desperate for acquisitions to fuel growth. The bank has been growing at between 25-30% pa over the past few years and since it was having a "good organic growth" it will go in for acquisitions only if there was real value in such a transaction. Any acquisition will have to ensure value to its business and its shareholders.

Tides of 10.04.2007

1. Hyundai Motor is expected to bring its instalment auto-financing unit Hyundai Capital Services Inc to India to service its expanding customer base. Hyundai's other financial arm is Hyundai Card, a credit card unit. In South Korea, Hyundai Capital Services owns over 60% of the market share of the domestic auto finance business.

2. Standard Chartered Bank, which is eyeing a stake in UTI Securities, will go ahead with its proposal to establish a presence in the securities broking space even if its plan does not work out. The bank, which is said to be in the race for UTI Securities along with several others, hopes to get its hands on the broking firm, which is at the moment controlled by Securities Trading Corporation of India (STCI). Citi, which also has a strong presence in the banking sector, is believed to be one of the players eyeing UTI Securities. STCI had last year taken over UTI Securities for Rs 265 crore from Specific Undertaking of Unit Trust of India.

3. Standard Chartered Bank has decided to launch private banking services in India as part of its plan to tap wealthy customers in a better manner. The banking group, which offers such services in some of its key markets, including Hong Kong, Singapore and Korea, feels private banking will help consolidate its presence in a country that currently contributes well over 12% of its overall revenues.

4. Standard Chartered Bank expects the final transfer of its asset management business to UBS to take place shortly. A remittance of about $120 mn, which will be reflected in this year's balance sheet, is expected to come in by way of the transfer.

5. Acer and ICICI Bank are now providing financing options for the purchase of IT solutions by the SMB (small and medium business), SME (small and medium enterprise) and education sectors. The Acer-ICICI financing option offers special loans, from Rs 30,000 onwards, for all office equipment at attractive interest rates. This tie-up facilitates easy buying and easy processing options, to help increase PC penetration in the SMB & SME sectors.

6. 2006 was a record breaking year for the auto industry. The industry posted its highest-ever sales of 1.3 mn vehicle units with a 24% year-on-year sales growth rate. Will the current fiscal see a repeat? No tax soaps were announced in the Budget 2007-08. No news for the auto industry was as good as bad or no good news as there were expectations from the Finance Ministry to push the current growth rate. Now comes higher interest rates with auto loans priced by banks at 15.5 % against 14.5%. Sales growth could drop to 12 % from 24%last year. Though corporates and high net worth individuals would not stall their purchases, it is the individual whose purchase decision may be deferred by a couple of months.

7. Oriental Bank of Commerce may raise up to Rs 500 crs capital during the first quarter of the current fiscal . This would be Tier-II capital. There is headroom for us to raise Tier-II capital. It will most likely tap the market with lower Tier-II bonds at an appropriate time. It has already obtained AAA rating from ICRA and CARE for the lower Tier-II bond offering, which is likely to be done on a private placement basis.

8. ABN Amro Bank is training NGOs to make the transition to micro-finance institutions (MFIs). It is focusing on micro-finance enterprise development in India. It is building the capacity of seven MFIs spread over Assam, Bihar and Uttar Pradesh. It hopes to build capacities of around 50 start-up MFIs over the next three years. Since 75% of the micro-finance activity is concentrated in four southern States, the bank is looking at the north and northeastern States to develop this programme.

9. HSBC is awaiting Government and RBI nod to expand its footprint in India through more branches and ATMs. It has 47 branches and about 160 ATMs in 26 cities and has applied for about 30 new branches and some 50 ATMs across the country, with a good chunk of them in the South India.

10. Centurion Bank of Punjab has hiked its prime lending rates by 50 bps to 15% pa, effective April 10. IOB has also hiked its PLR.

11. SIDBI has registered 80%growth in credit disbursement in Kerala in the last fiscal as it disbursed Rs 750 crs for the SME sector in the State against the Rs 479 crs in the previous fiscal.

Tides of 9.04.2007

1. All loans, including existing home loans, offered by SBI will be priced higher from Monday. This follows the 0.5% point increase in the benchmark Prime Lending Rate. The benchmark PLR (referred to as SBAR) has been revised upwards to 12.75% from 12.25% pa, effective April 9. Although the mark up in rates by SBI follows others such as ICICI Bank, HDFC and Bank of Baroda, the quantum of the increase has been lower than its peers, who have marked up their rates by 75 to 100 bps.

2. IDBI Bank Ltd has proposed setting up a private equity fund and a mutual fund as separate subsidiaries in a bid to become a complete financial powerhouse.

3. Centurion Bank of Punjab has launched a new service for high networth individuals. The service called `Centurion Elite' will offer wealth management, financial planning, free debit card with enhanced withdrawal limit of Rs one lakh per day and other privileged banking services. HNIs wanting to avail themselves of the service should have a minimum deposit of Rs 10 lakh but they can start by opening a savings account for a minimum of Rs one lakh.

4. India's foreign exchange reserves have vaulted by around $45 bn during the just ended fiscal 2006-07 to $199.179 bn, nearly kissing the $200-bn mark. The reserves stood at $154.209 bn at the beginning of the last fiscal. The forex kitty has seen a surge of $1.433 bn to $199.179 bn in the week ended March 30. During the previous week, the reserves expanded by $1.789 bn. Forex reserves have seen an accretion of around $4.7 bn in three consecutive weeks.

5. Vijaya Bank proposes to enter into insurance business directly after it finalises its exit from the three-way life insurance joint venture that it had entered into along with Principal Financial Group of the US and PNB.

6. PNB plans to cut exposure to personal loans, including home finance, to bridge the gap between higher credit offtake and lower deposits. The bank is concerned over widening gap between resource mobilisation and credit expansion.

7. Bank of India said it will promote folk artistes in the country. It has planned to set up an art trust to provide patronage to the folk artistes and would work in cooperation with National Institute of Fashion Design and SIDBI for upgradation of their skills.

8. Armed miscreants looted Rs 1.75 lakh from PNB in naxalite-affected Imamganj bloc in Gaya district of Bihar. Five unidentified criminals raided the Raniganj branch of the PNB and decamped with Rs 1.75 lakh at gun point.

9. RBI was in the process of identifying illiquid government bonds for buyback and issuing liquid gilts. The aim behind this buyback was to make the gilt yield curve more liquid.

10. Dena Bank is aiming at further reduction in its gross non-performing assets (NPA) during the financial year 2007-08. The gross NPAs and net NPAs stood at Rs 857 crs and Rs 414 crs respectively. It has set a target to bring down our gross NPAs from the existing 4% to 2% this year.

11. Mid-corporates, small and medium enterprises (SMEs) and agriculture are driving SBI’s credit growth even as retail loans are losing steam. SBI ’s year-on-year credit growth has slowed to around 25% at the end of March 2007 from 29 % a year earlier. The slowdown in retail loans is sharper. The largest bank’s growth in retail loans has slowed to nearly 20% from 27% a year earlier.

12. Union Bank of India has scaled down its credit growth in 2006-07 to 16.5% as against 25% projected at the beginning of the year.

13. As many as 18 public sector banks have defaulted in filing their monthly statements of Banking Cash Transaction Tax (BCTT) collections till January, 2006-07. Under the BCTT scheme, banks are required to furnish branch-wise details of BCTT collected every month to Income Tax department.

14. International brokerage house Citigroup, Australia’s Macquarie Bank, Standard Chartered, France’s Societe Generale and Kuwait-based Global Investment House are in the race to acquire 49 per cent stake in UTI Securities, currently owned by Securities Trading Corporation of India (STCI). STCI, which bought 100% stake in UTI Securities for Rs 265 crs last year from Specified Undertaking of UTI (SUUTI), is looking to sell 49% stake to a strategic partner. As per the deal, STCI has a minimum lock-in of 51% stake in UTI Securities for three years, which ends in 2008.

Tides of 6.04.2007

1. Bank branches are no longer muggy halls with dull colours, long queues and grunting fans. It is all about air-conditioned halls, channel music, bright colours and swanky lounge areas. A customer of a new private sector bank said, "I don't want to be caught in a queue; in this branch I can sit in the meeting room and discuss the financial details with my bank manager. I can sip coffee and surf the Internet on my laptop at my bank branch. It feels good to be treated in that manner at my bank branch, after a tiring day at work." These branches are specially targeted at high-net worth individuals and mass affluent customers.It is basically a move to give the customers a comfort zone. It helps in retaining the customers. SBI has over 150 such branches across the nation and is in the process of upgrading some other branches as well. The UTI Bank branch at Andheri (Mumbai) has a business lounge, Internet access zone and a meeting room. The branch has special investment advisors and relationship managers to advise customers on financial matters.

2. State Bank of Hyderabad will be Basel-II norms compliant by September 2007. The bank, which completed 65 years today, is optimistic of achieving a business turnover of Rs 1 lakh crore by March 2008. The first branch of SBH was started at Gunfoundry, Hyderabad on April 5, 1942. It has a network of 965 branches and 400 ATMs. It has brought all its branches under core banking solution and is offering value-added services such as any branch banking and Internet banking.

3. Banks' term deposits swelled in the last three months, but bankers aren’t happy because the increase has come at the cost of low-cost current and savings account (CASA) balances. A large part of the accretion to fixed deposits till March 16, 2007 was on account of a flight of funds from the low-cost CASA.

4. Industrial and Commercial Bank of China (ICBC), which listed in October after the world’s largest initial public offering to raise $19.07 bn, sees India as a key potential market. Zhan Xiangyang, director general of the world’s third largest bank, with a market capitalisation of $183.85 bn.

5. Aggressive marketing of online services and a sharp growth in internet connections have seen the internet gaining popularity as a banking channel. But, while banks are extremely bullish about the development of this channel, they are discovering the challenge of protecting gullible customers from online fraudsters. The onus of fighting phishing is as much on the customer, or the prospective victim, as it is on the bank. However, banks are concerned that the negative publicity from phishing attacks could harm the development of this channel. Figures released by anti-phishing service provider RSA Consumer Solutions suggest that phishing attacks have grown by 41% internationally in the past 12 months.

6. The 280-year old British banking giant Royal Bank of Scotland is learnt to be considering applying for a banking licence in India.

7. India's largest commercial bank, SBI, hinted at a hike in its interest rates next week following the RBI move to raise the cash reserve ratio (CRR) and a key rate last Friday.

8. Faced with a chorus of protests from the corporate sector, the Finance Minister, P. Chidambaram, has called for a meeting of bankers and top officials of the RBI for a review of the recent monetary tightening measures. Top bankers said this was one of the rare occasions when the Finance Minister has called for a meeting with bankers on the eve of the lean season credit policy scheduled for April 24. Bankers said that none of them was expecting any rollback in the RBI monetary tightening measures. A top banker said, "At best, we may see the interest on CRR balances being restored."

9. Banks will soon get tied up explaining to customers why their loan request has been turned down, or so it appears. RBI has directed banks to reveal to the customer the reason for rejecting his loan request, irrespective of the amount and category. The amended code will be effective from April 30, 2007. The apex bank has taken these steps to make the lending operations of banks and financial institutions more transparent. It has asked banks to take steps for making customers aware of this regulation. Banks would be placing the notice on their websites and also sending circulars to their existing customers.

10. Union Bank of has upgraded and automated its 'Swift' messaging system to make international money transfers faster and less expensive at a number of its branches across the country. Using Turbo Swift system, the bank has converted its international transfers to an automated platform, replacing a previous system that required payment messages travelling over the Swift Network to be sent manually.
By switching to an automated system like TurboSwift, the bank will be able to support many of those services at a fraction of the previous time and cost. Installation of the system was completed in 12 days by Synergy Login Systems, BankServ's distribution and support partner in India.

“Read, every day, something no one else is reading. Think, every day, something no one else is thinking. Do, every day, something no one else would be silly enough to do. It is bad for the mind to be always part of unanimity."

Tides of 5.04.2007

1. LIC Housing Finance has hiked its lending rates by 1.25% for floating and fixed rate loans. The floating rate has inched up to 11.25% onwards from the earlier 10 % and the fixed rate has increased to 11.75% onwards from 10.5%.

2. ICICI Prudential Life Insurance Company has infused Rs 245 crs and taken its capital base to a total of Rs 2,060 crs, the highest among the domestic life insurers. This was the fourth equity hike in the last financial year. The two promoters, ICICI Bank and Prudential plc, contributed to the capital in their existing proportions of 74:26, respectively.

3. Tirupur knitwear exporters said the surge in bank lending rates, following last week's RBI hikes on repo rates and cash reserve ratio (CRR), will adversely impact exports, especially garment shipments. The increased rate on borrowing would render exports uncompetitive as in most cases the garment exporters negotiate their export prices-based on the then prevailing production cost.

4. PNB has received an in-principle approval from the UK's financial sector regulator to operationalise its subsidiary in London. The bank would now be required to infuse an initial capital of £25 mn pounds (about Rs 225 crs) in the subsidiary, after which a formal licence would be given to start the subsidiary and open a branch there (most likely in Southall). The Financial Services Authority (FSA), which is the regulator of the UK financial sector, had set three conditions to get the subsidiary running: capital infusion, providing an internal auditor and appointment of an Executive Director.

5. Vijaya Bank has reported total business of Rs 62,232 crs for FY07, a 39% increase over FY06. The growth was well above the targeted Rs 55,000 crs for last financial year. Deposits showed 35% growth and advances grew 46% in FY07 over FY06. FY07 saw advances of Rs 24,852 crs and deposits of Rs 36,000 crs. About 31% of its deposits came from current and savings accounts during the period. In FY07, the bank made cash recoveries of Rs 288 crs, which is expected to contribute to its bottom line.

6. In an effort to check the misuse of export credit by small exporters who benefit from the interest rate arbitrage between low-interest currencies and the Indian rupee, the RBI has asked banks to ensure that the Foreign Exchange Management Act (FEMA) regulations are not violated during such transactions. An RBI directive has asked banks to be careful in giving guarantees against export advances and has told them to verify the exporter’s record to assess his ability to execute such orders. Many exporters with low export turnover were receiving large amounts as export advances in currencies with lower interest rates against domestic bank guarantees. The exporters were depositing such advances with banks in Indian rupee to take advantage of the interest rate arbitrage. Further, the guarantees were being issued even before the advances were received, with a condition that they would be operational only after getting the funds, the RBI said. The guarantees are issued at par value, against the discounted values of the export advances.

7. With an aim to improve the performance of its employees, Jammu and Kashmir Bank has announced a new package of incentives and promotion opportunities. The the employee-oriented issues must include recruitment, development and learning, work environment and communication, rewards and recognition, health, balancing work and personal life and financial security. The new package, 'Nai Subah', is aimed at initiating the much desired cultural change in the bank to make it an employer of choice. The incentives include skill advancement programmes, pay enhancement, mass promotions, an improved transfer policy, increase in variable and revamped performance management system, regularisation of all ad hoc employees, a new generation organisational set up and designations and foreign tours. Under the skill development programme, the bank would lay stress on behavioural and technical training and train its employees in new skills to keep with the industry, fine tune their job skills and learn to work independently.

8. The ICICI Bank will be locating the back office operations of the Southern region of the country in Hyderabad Financial District. The bank is constructing a 28-storied centre in the district at an investment of Rs 1,500 crs. The bank's Hyderabad facility, coming up in 8 acres, will accommodate 25,000 employees and is expected to provide indirect employment to nearly one lakh people.

9. BoB, the fifth largest bank in India, is realigning its operations into four business lines, retail, rural and agriculture, small and medium enterprises and corporate banking -in sync with market needs. The realignment envisages shifting of all mid-corporate and large corporate accounts from the banks’ retail branches to its wholesale banking branches. The decision to consolidate corporate accounts in about 10-15 branches has been influenced by experiences the bank had at branches with predominantly retail customers and only a few corporate accounts.

10. Central Bank of India, has finalised five merchant bankers for its initial public offer. The IPO, expected by end-May 2007, is expected to raise around Rs 1,000 crs equity capital. The bank has received all regulatory clearances for converting about 71% of its large equity base into preference shares. The proposal for conversion of shares, which was stuck at the RBI, was recently cleared by the government. The RBI was averse to allowing banks to convert 70% of their equity into preference shares. Earlier, the RBI had sought to put 40% cap on conversion of equity into preference shares. Central Bank officials said of the Rs 1,124.14 crs equity capital, Rs 800 crs would be converted into preference shares. The conversion will lower the bank’s paid-up equity capital to Rs 324.14crs, which will help the bank price its IPO better as its earnings per share improve. The bank has appointed IDBI Capital markets, Kotak Securities, ICICI Securities, Citigroup and Enam Financials as the lead book-runners.

11. The ICICI Bank will be establishing 14 finance chairs in 14 business schools across the country. Under this initiative, the Bank will sponsor the salaries of chair professor and an assistant professor at the B-school. The initiative might cost ICICI Bank over Rs 13 lakh considering the salary of a professor in these institutes is around Rs 50,000 and that of an assistant professor is over 35000. The chairs will be established to take up research activities in the field of finance. Few of the institutes where ICICI Bank would be establishing the finance chairs include SP Jain Institute of Management Research, Mumbai, Narsee Monjee Institute of Management Studies, Mumbai, Welingkar Institute of Management Studies, Mumbai, T A Pai Management Institute, Manipal and Sydenham College of Commerce and Economics. ICICI Bank is also said to be in talks with IIM Ahmedabad to provide them with support in finance content and curriculum development.

12. Crisil is organising a two-day executive training programme, `Real estate financing, the golden goose or Damocles' sword?" on April 20-21 at Hotel The Leela Palace, Bangalore. The workshop is designed for lenders / investors in real estate sector, real estate developers as also professionals from the legal / compliance department of banks.

13. The UTI Bank board will meet on April 17 to decide on P J Nayak's offer to step down as CMD after July 31 since RBI has turned down the bank's proposal to grant him a further two-year extension without splitting the CMD's post. UTI Bank has informed the Bombay Stock Exchange that it will make public its future course of action after the board meeting. On February 20, the bank's board had reappointed Nayak for a further two-year term starting August 1.

14. If there is one indicator that stock market analysts watch closely, it is advance taxes. That is because this number indicates what kind of financial results a company is likely to post. And these numbers have it that SBI has pipped LIC to emerge as the highest corporate taxpayer in the country. For 2006-07, SBI paid Rs 2,670 crs as advance tax a 71% growth over the previous year. LIC, on the other hand, paid Rs 2,000 crs in corporate taxes, up 11% over last year.

Tides of 3.04.2007

1. The rising inflation has driven the RBI to raise the CRR to suck liquidity out of the system. Though given up as an indirect instrument, the CRR seeks to impact the level of money supply by affecting the value of the multiplier and is thus on a par with Open Market Operations.

2. It's now the turn of public sector banks to hike lending rates, including interest rates on housing loans. Close on the RBI’s recent announcement to hike the cash reserve ratio by 50 bps and the repo rate by 25 bps, PSU banks are gearing up to hold meetings to discuss the unfolding interest rate scenario. Bankers said that the cost of funds was going up in such a manner that there was no way PSU banks could stay away from hiking their lending rates.

3. Fullerton India Credit Company is looking at launching a co-branded (with a bank) credit card, subject to the RBI approval, in the near future. A major segment of its customers are self-employed individuals with an annual turnover of less than Rs 2 crs. The company has a biometric card (pre-loaded cash card) in collaboration with ICICI Bank. Fullerton, a non-banking finance company, is a subsidiary of Asia Financial Holdings Ltd, a wholly owned subsidiary of Temasek Holdings, Singapore. It is mainly involved in disbursing loans to salaried individuals, shop-owners, traders and entrepreneurs.Temasek has invested $150 mn in the company and plans to invest an additional $50 mn during the last quarter this year.

4. In the coming months, ICICI Bank will strive to establish a connection in the minds of its customers between using their debit cards and saving the planet. Today, most people use debit cards to draw money from ATMs and spend the money at shops and restaurants. ICICI Bank wants its customers to use debit cards straightaway in shops and restaurants and thereby minimise the use of paper currency. Less paper use is more environment-friendly. The RBI's figures say that in 1935, India had 100 mn pieces of currency notes in circulation. As at the end of March 2005, the notes in circulation were 36,985 mn or, about 370 times more.

5. BBVA, a Spanish financial services group, has received the RBI approval to open a representative office in Mumbai. It will have five staffers and will be managed by BBVA's Singapore branch. The bank's present business in India amounts to more than € 400 mn (about Rs 23.1 crs). In 2006, the group had signed an agreement on money transfers with ICICI Bank.

6. Karnataka Bank Ltd, which achieved business turnover of over Rs 23,500 crs during 2006-07, is planning to reach a turnover of Rs 28,500 crs during 2007-08 with incremental business growth of Rs 5,000 crs. This includes Rs 3,000 crs of deposits and Rs 2,000 crs of advances.

7. An ICICI-Securities (I-Sec) report on the recent monetary policy measures said that the chances of another CRR hike in this quarter would be low, given the fact that the first quarter in the fiscal is seasonally slow for forex inflows. But there is a 50-50 chance of another 0.25% hike in the repo rate at the time of the April policy, I-Sec said. Adding that the next three inflation readings would be critical, it said, "Should headline inflation fail to come below 6%, and manufacturing inflation continues to rise, RBI may be compelled to nudge repo rate once more, to show its commitment to containing inflation."

8. Mr Aditya Puri, MD & CEO of HDFC Bank, has won the `The Asian Banker Leadership Achievement Award 2006 for India”. The awards were announced last week at Jakarta, Indonesia, at the Asian Banker summit. The Citation for Mr Puri said "he had kept his eye on the ball by pursuing growth with quality. In 2006, he also notably achieved the lowest asset impairments, highest cost efficiencies and best quality growth in core deposit generation among all of the Indian banks. His skilled leadership has seen HDFC Bank stay away from irrational pricing strategies pursued throughout 2006 in the Indian market... " The selection was headed by an international jury chaired by Mr William Seidman, former Chairman of the Federal Deposit Insurance Corporation (FDIC) in the United States.

9. Realty loans, once ardently wooed, are now turning sour for banks as non-performing assets start mounting. A chief executive of a public sector bank, who declined to be identified, said the realty non-performing loans (NPL) portfolio of his bank was as high as 3% of the gross housing loan assets. Under current regulations, if the debt service payments are overdue for more than 90 days, the loans automatically become NPAs. "There are payment overdues of more than 90 days," he said. The CEO said that a substantial chunk of the NPLs came from organised builders and large housing projects. The situation was similar in almost all the public and private sector banks in the country, he added. In some of the banks, the NPLs were as high as 4 %, bankers said. Steep increases in home loan rates over the last three years have also contributed to the deterioration in asset books, the bankers said. The worst affected were floating rate borrowers. Many customers had borrowed floating rate loans when interest rates were as low as 7.25 and 7.5%. The same borrowers were currently forced to cough up double-digit rates on the loans now, leading to a sharp increase in debt service payments.

10. The year 2006 saw a 3% dip in banking sector ad volumes in the print medium over 2005. However, according to a survey conducted by AdEx India, there was a growth of 10 % compared with the year 2004. While public sector banks had a share of 60% of the ad volumes, the rest came from private sector banks. With State Bank of India leading the pack with 10 per cent share, the top five advertisers contributed 37% of the total volumes in 2006, says the study. Compared with 2005, there was a dip of 7 % in ad volumes of public sector banks, whereas private sector banks saw a 4% rise.

Tides of 2.04.2007 100th Issue

1. Aviva Life Insurance Company Ltd is open to picking up equity stakes in Indian banks for cementing its bancassurance arrangements. Aviva already has equity investments in financial institutions in Europe. Aviva has equity investments in Italian banks and financial institutions that also provide a life insurance distribution network. Aviva India is a 74:26% joint venture between the Dabur group and Aviva Life Plc of the UK.

2. Public sector banks have started going in for short contractual appointments. Earlier, private and foreign banks offered these kinds of jobs - to reduce their wage bill and also remove the unpleasantness of firing someone after they had outlived their purpose. SBI and IDBI are among those that have decided to appoint executives for a short tenure. SBI is recruiting about 1,000 customer relationship executives, while IDBI is recruiting about 450 executives on a contract basis. Most of these new executives will be based in the metros and top urban centres, to sell banking services to small and medium enterprises (SME) and personal banking segments.

3. Corporation Bank and HDFC Bank have been authorised to undertake Primary Dealership business effective April 2.

4. The public sector general insurance companies under the revised promotion policy will be holding written test for its officers for promotion up to the cadre of Chief Manager (Scale V).

5. Andhra Bank's Chennai zone, comprising Tamil Nadu and Kerala, has ended 2006-07 with total business of close to Rs 5,000 crs. This makes the zone almost as big as City Union Bank. The business has more than doubled in under two years. The zone has 88 branches, 40 ATMs and eight extension counters. It plans to put up another 11 branches in 2007-08.

6. THE PACKAGE for promotion of Micro and Small Enterprises (MSEs) placed by the government in Parliament last month, is by and large a repetition of past promises without concrete plans of action or fund allocations, though it has also some welcome features, especially in respect of entrepreneurship development among women. The least the government should have done is to announce tax relief to public sector banks and financial institutions on their contributions for to the Credit Guarantee Corpus of the Small Industries Development Bank of India (SIDBI), instead of merely announcing an intention to study the feasibility of allowing such deduction.

7. It’s belt-tightening time for home loan borrowers. Auto and consumer loans could also get costlier as the RBI, in an all-out attack on inflation, is tightening the noose around banks. Unlike in the past, when bankers extended the tenures of home loans instead of raising the quantum of monthly payments, this time your equated monthly instalments (EMI) are bound to rise. But people with money in the bank, especially senior citizens, can rejoice. When money is tight, deposit rates go up. Banks are already offering rates of 9.5-10% on deposits above one year. Rates will soon touch 10-10.5% for deposits up to three years.

8. From the sublime to the prosaic, the Brand Equity Quiz '07 had it all. India's largest corporate quiz showsaw a first in the regional round in Mumbai. After the preliminaries and with 70 teams competing, four teams qualified on stage directly. With Deutsche Bank and UTI slogging it out for the finals, the stage was set for some rapid fire quizzing. Both teams were buzzer-happy, sometimes to their detriment. Even before O'Brien had finished asking the question — which company sells the largest selling drug for cholesterol? — Deutsche Bank hit the buzzer. Waiting impatiently for him to finish asking the question, both Sudipto Roy and Rajiv Rai of Deutsche Bank called out in unison — Pfizer's Lipitor. The duo bagged the first prize of Rs 1.30 lakh and a chance to brush up on their skills for the final to be held at the end of April, with nine other cities coming to Mumbai for the final.

Tides of 1.04.2007

1. In a backdrop marked by little or no awareness about the need for financial protection, 81%of the country's households save, with urban people accounting for a bigger proportion of savings – 88%, compared with rural areas, where 79% of the households save. This forms the crux of a survey conducted by the National Council of Applied Economic Research (NCAER). Expenditure in urban areas accounts for 62 % of income, compared with 56.2 % in ruralareas. Salary earners constitute the highest income earners in urban centres, enjoying the highest per capita income. Nearly 37% of the urban population constitutes chief earners who earn regular salaries/wages. Their share in total income is 45%. In contrast, people engaged in agri businesses make up the largest group among chief earners. Their contribution to total income is 43%, the survey has established. Also, typically urban, salaried households are the most well-off section.

2. Oriental Bank of Commerce, has entered into a tie-up with Escorts Ltd, a tractor manufacturer, for providing retail tractor finance to farmers. The bank will also offer credit facilities to authorised dealers of Escorts under a Channel Financing Arrangement.

3. American Express wants to extend its wealth management services to high networth individuals beyond Mumbai and Delhi to Bangalore. The bank launched FAS in India last year, and piloted it in Bangalore around end-2006. Bangalore is the third largest market in the country. The city is a high-potential market, and would be our focus in the next few months. There are over 83,000 individuals in India with over $1 million, and about 7.11 lakh people with over $100,000 of which about 10-15% of these are in Bangalore. The size of the wealth industry is growing rapidly in India, and Bangalore is among the fastest growing cities.

4. Consumer loans including home from ICICI Bank, will cost more by 1%, a day after the RBI hiked key short-term rates. RBI had hiked the repo rate by a quarter percentage point to 7.75% and increased the cash reserve ratio by 50 bps to 6.50%. ICICI Bank has increased its floating reference rate (FRR) by 1% to 12.75% for consumer loans (including home loans), effective March 31. For existing floating rate customers, the increase in FRR by 1% will be effective April 1. The bank has also hiked its benchmark advance rate (I-BAR) by one percentage point to 15.75% pa, payable monthly.

5. Karnataka Bank Ltd has increased interest rates on domestic term deposits with effect from April 1. The rates would be applicable to fresh deposits and renewals of maturing deposits. Following are the interest rates for deposits up to Rs 5 crs with the earlier rates given in brackets.: 4.5 % (4.25 ) for maturity pattern of seven days to 14 days; 4.5% (4%) for 15 days to 45 days; 5.5% (5 %) for 46 days to 90 days; 6.5% (6%) for 91 days to 180 days; 7.5% (7%) for 181 days to less than a year; 8.5% (7.5%) for one year to less than two years; 9.25% (7.5%) for two years to less than three years; 9.5% (7.75%) for three years to five years; and 9% (8%) for maturity pattern of above five years. The release said that the bank has a special deposit scheme for 600 days, carrying an interest of 9.25 %. The interest rate for deposits of senior citizens in this scheme is 10%.

6. Bank of Baroda hopes to clock business turnover of Rs 2,00,000 crs in fiscal 2006-07. It has targeted a turnover of about Rs 2,45,000 crs by end-2008. Its turnover in 2005 was Rs 1,23,000 crs.

7. The interbank call rates touched an intra-day high of 70% on the last trading day of the financial year, signalling extreme liquidity tightness in the market, before closing at 30%. The market has been reeling under tight liquidity on the back of advance tax outflows of around Rs 40,000 crs and the RBI’s liquidity absorption measures.

8. Finance Minister P Chidambaram said the government was ‘fully supportive’ of RBI's decision to increase key short term lending rates and cash reserve ratio to contain inflation.

9. ICICI Bank CEO M V Kamath and 7 others have been charged with dacoity after a car financed by the bank was allegedly forcibly repossessed. The offences under Section 395 (punishment for dacoity), 120 (b) (criminal conspiracy), 29 (document) and 506 (b) (punishment for criminal intimidation) of the IPC were registered against Kamath and others after a local court directed police to do so on a complaint by a borrower.

10. ABN Amro, currently in merger talks with British banking major Barclays, has doubled its micro finance clientele globally with its India portfolio in the segment growing to 26.2 mn Euro in 2006. The growth in the bank's Indian micro finance portfolio came through partnerships with 26 intermediaries across six states and the business achieved break-even within one year of start-up and continues to operate profitably.

11. It's a reasonably well-known fact that many banks insist customers open a fixed deposit with them to rent a safe deposit locker. In large cities, some banks ask for a minimum Rs 25,000 as fixed deposit for a locker. A 63-year-old Mumbai consumer complains that a cooperative bank demanded Rs 1 lakh as the minimum deposit amount. Few consumers, though, are aware that such a demand is in violation of a Reserve Bank of India circular issued in 1984. According to the circular, public sector Banks cannot insist on a fixed deposit as a prerequisite for allotting lockers.Banks, however, were permitted to seek a deposit but not as a condition for allotment and use the interest to cover the annual rent. Alternatively, advance rent could be collected for three years.

12. Flow of credit to the self help groups (SHGs) under the Swarnjayanti Gram Swarozgar Yojana (SGSY) has been less than the target in Orissa. By January 2007 only 51% of the targeted credit could be achieved by the banks operating in the state. Only 65.84% of the sponsored applications were sanctioned and of them 75% only were actually disbursed. During Apr-Dec 2006, total 76,955 applications were sponsored and 50,664 applications were sanctioned. Of this about 38001 applicants were disbursed loans.