Tides of 3.07.2015

1.   Mahila bank may merge with SBI

 The Bharatiya Mahila Bank (BMB), launched only 20 months ago, may be merged with the State Bank of India. According to sources, the merger proposal is being discussed within the government considering that the newly started bank will find it a challenge to build a distribution reach.

The bank was started with a capital of Rs 1,000 crore which was provided under the budget. The bank has opened 62 branches, mobilized deposits of around Rs 800 crore and has loans of around Rs 400 crore. Following the announcement in the 2013 budget, the bank was launched in record time in November 2013. But despite the speed of the roll-out, the bank's coverage has been very meagre and large lenders have been able to open more women's account during the same period.

According to analysts, such a merger would not be negative for State Bank of India but would in fact boost the bank's capital adequacy ratio. The bank has hardly any non-performing assets as it does not have any exposure to industry.

SBI, which is the country's largest lender, had in past merged its two of its associate banks — State Bank of Saurashtra and State Bank of Indore. SBI merged State Bank of Saurashtra with itself in 2008. Two years later in 2010, State Bank of Indore was merged with the parent. Among the public sector banks, BMB is the only unlisted entity. 

2.    Great News keep pouring this week:

On 1st July, the launch of Digital India has drawn investments worth Rs 4.5 lakh crore and will create 18 lakh jobs.

• On June 30 a group of U.S. industry executives from the U.S.-India Business Council (USIBC) met with the Chief Minister of Maharashtra, Devendra Fadnavis for a discussion about investment opportunities in the state and bagged investments worth Rs 4,500 crore that will create 50,000 jobs
  
  
• Blackstone, a global investment and advisory firm, is learnt to have given its consent to invest Rs 750 crore in EON Free Zone SEZ, Rs 1,200 crore in Hingewadi Phase -III, Rs 1,500 crore in IT Park in Central Mumbai and Rs 1,050 crore in another IT Park in Mumbai.
• The state delegation signed an MoU with Blackstone and Panchshil Joint Venture (SPV) for three different projects. Coca Cola too has announced Rs 500-crore investment at Lote Parshuram in Chiplun (MIDC).

Tides of 2.07.2015

1  1.  Rating firm Moody's Investors Service on 29.06.2015, downgraded state-owned Bank of India (BoI) and Canara Bank a notch down in terms of Baseline Credit Assessments (BCAs), an indication of intrinsic or standalone financial strength of the company. It has downgraded the BCA of Bank of India and Canara Bank to ba3 from ba2 on account of rise in NPA.Canara's BCA could be upgraded if there are substantial improvements in the bank's asset quality metrics, Moody's said in a statement. There could be upward pressure on its BCA if the bank is able to demonstrate access to equity capital markets as well, it added. The rating agency said that the downward pressure on BOI's BCA could develop from a continued deterioration in impaired loans. "A material decline in the combination of profits, loan-loss reserves and capital, relative to impaired assets would also put pressure on its ratings," it said. "Additionally, any indications that support from the Government of India (Baa3 Positive) had diminished or that additional capital requirements may arise beyond government's budgeted amount could put the bank's deposit and senior unsecured debt ratings under pressure," it added. Moody's has also affirmed the BCA and adjusted BCA of ICICI , Axis and BOB at baa3, baa3 and ba2, respectively. It has also affirmed the deposit ratings of five Indian banks - Axis Bank, ICICI Bank, Bank of Baroda, BoI and Canara Bank.  

2.   The finance ministry is working on a comprehensive package to help state-run banks, which are saddled with huge bad loans, according to Minister of State for Finance Jayant Sinha. Rising bad loans at Indian banks over the past three years amid an economic slowdown has prevented banks from lending more, despite three interest rate cuts by the central bank this year totalling three-quarters of a percentage point. This has affected the government's plan to spur a revival in credit to key sectors such as infrastructure.

3.  Infibeam has filed a draft prospectus for an initial public offering to raise Rs 450 crore ($70.69 million), becoming the first of India's ecommerce companies to list its shares on the domestic market. Infibeam's IPO comes at a time of intense competition in India's e-commerce sector, with high cash burn rates at industry leaders Flipkart, Snapdeal and Amazon.com's India unit raising concerns among investors. Launched in 2007, Infibeam runs the infibeam.com and BuildaBazaar.com websites. Last year, Sony Music bought a 26 per cent stake in Indent, the company's digital entertainment arm. The company will use the IPO proceeds for expanding business, including setting up a cloud data unit and 75 logistics centres.

4.  A top Flipkart executive told Reuters in May it was not yet ready for the stock market and the resulting investor scrutiny.

5.  The boom in e-commerce has led the Central Govt.to consider amending the Consumer Protection Act, 1986. Pointing out that India’s e-commerce market is expected to grow by more than 50 per cent in the next five years, the Survey said the Centre proposes to include sufficient provisions for consumer safeguards in the ongoing amendments. The Survey also said that migration from traditional stores to modern retail is continuing in the country but still modern retail accounts for only 8 per cent of the total market.

6.       “However, India remains an attractive long-term retail destination for several reasons, including its large population, 58.3% of which is below 30 years and 31.1% of which lives in urban areas with rising disposable incomes,” the Survey added.

Tides of 1.07.2015

What went wrong in Greece: the story in five charts---livemint

A quick look at how Greece has got to the brink of a default that threatens to send shock waves through the global economy

People stand in line to withdraw cash at an ATM in Athens on Sunday. Photo: AFP

The Greek tragedy has unfolded over several years. Here is a quick look at how the country has got to the brink of a default that threatens to send shock waves through the global economy.

It all began when the Greek economy imploded after the global financial crisis. The economy shrank for six years in a row.

Greece has lost an entire decade, thanks to its deep economic crisis.

The roots of the problem can be traced to the years before 2008. Greece had already allowed massive economic imbalances to build up. Take a look at the chart showing its current account deficit.

And the fiscal numbers were made to look better, thanks to creative accounting.

Any country with such large economic imbalances tries to adjust through an exchange rate depreciation that makes exports more competitive. Greece does not have this option because it uses the euro (though using the euro also gave the country some advantages when it came to borrowing).

So the brunt of the adjustment had to be met through the labour market, or a combination of job losses and falling wages. Unemployment soared till more than one in four Greek workers are now jobless.

The growth collapse destroyed a tax system that was already weak because of evasion. The Greek government was forced to borrow to keep going, which it was already adept at since being in the euro initially allowed it to borrow at the same rate as Germany.

Gross debt rose sharply even as the economy was shrinking: a rising numerator and a falling denominator can never be good news in such circumstances. The interest rates that lenders were asking to lend to Greece finally went up as the financial markets belatedly accepted that the risk profile of Greece was not the same as Germany’s. These rising interest rates sent Greece into a debt crisis.

The troika of the International Monetary Fund, European Central Bank and the European Commission stepped in with a bailout once the private credit markets went on strike. They asked Greece to accept austerity measures if it wanted financial help. The austerity can be seen in the sharp drop in the fiscal deficit as well as the current account deficit. Spending cuts dominated austerity policies since tax growth in a shrinking economy was not a viable option.

Greek citizens had to bear the resultant pain. Expectedly, that led to a political backlash. The left-wing Syriza government won the January 2015 elections after a vibrant campaign against austerity. It is this government that is now involved in a confrontation with the troika of lenders.

The end game is now on the horizon.

Tides of 9.02.2013

1. Canara Bank to open New ATMs ;

Canara bank to open 2000 ATMs by March 2014, taking the total number of ATMs to over 5000 by the end of the financial year 2013-14.

2. RBI sets up panel to review grievance redressal mechanism:

The RBI has set-up a working group to review and make improvements in the grievance redress mechanism for bank customers. “A Working Group has been constituted in the Reserve Bank of India to review, update, and revise the Banking Ombudsman Scheme, 5 2006,” the Central Bank said in a statement. In financial year 2011-12, the Banking Ombudsman’s office of the RBI received 72,889 complaints. It disposed off 94% of the customer complaints in the same year, RBI said in its annual report of the Banking Ombudsman Scheme 2011-12. (BL Dt. 06.01.2013 p.3)

3. Give preference to non-corporate sector for new banking licences: Rangarajan:

The RBI, while allotting new banking licences, should give preference to the non-corporate sector, said Mr. C Rangarajan, chairman of Prime Minister's Economic Advisory Council. “It is possible for the Reserve Bank to initially start with non-corporate business and find out whether there are suitable applicants and thereafter proceed to look at the other applicants,” he said, in an interview to PTI. RBI is in the process of finalising the guidelines for giving new bank licences. Parliament approved the Banking Laws (Amendment) Bill last month.

4. IMF sounds warning on bank license:

The IMF has warned India against licensing corporate entities to step into the business of commercial banking, saying the risks associated with such a move potentially outweigh the benefits of creating more banks. IMF’s Financial System Stability Assessment Update said it would be prudent for India to first put in place and gain sufficient experience in implementing a comprehensive framework for the purpose before considering the entry of conglomerates into banking. “The legal, operational and regulatory framework for consolidated supervision of both bank-led groups and financial conglomerates is still missing some important elements,” it said, while also flagging concerns about the lack of total independence for the RBI from Government influence.

5. Canara Bank reduces lending rates :

Following the recent reduction in RBI’s Policy rates, Canara Bank has reduced its base rate by 25 basis points, from 10.5% to 10.25% with effect from February 4. The bank has also revised its benchmark PLR downwards by 25 bps, from 14.75% to 14.5%

Tides of 25th january 2013

1.    RBI governor Duvvuri Subbarao met finance minister P Chidambaram on Thursday to discuss the macro-economic situation ahead of the January 29 monetary policy review of the bank.   The next quarterly review policy is scheduled for Tuesday. The RBI is scheduled to announce the third quarter review of the monetary policy for the financial year 2012-13 on January 29. The Indian central bank is widely expected to cut key policy rates by at least a quarter a percent to boost economic growth. In the previous review announced on December 18, the RBI has indicated that it would ease monetary policy in January review. "In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onward," the RBI had said in the mid-quarter review of monetary policy announced December 18.

2.    The finance ministry has allowed state-owned Life Insurance Corporation (LIC) to invest up to 30% in a company from its earlier cap of 10% - a move seen as an attempt to bolster the government's disinvestment programme by allowing LIC to invest in public sector firms.

3.    Small entrepreneurs may soon get access to credit at a lower interest rates, as the Reserve Bank of India has allowed Small Industries Development Bank of India (SIDBI) to go for external commercial borrowing (ECB) to fund micro, small and medium enterprises (MSMEs). RBI has permitted SIDBI to raise up to $500 million (nearly R2,700 crore) a year. However, small entrepreneurs are still wary, as their loan-sizes are relatively small. Banks charge 13-16% interest on loans to small enterprises. 

4.    More than a dozen banks, majority them are public sector banks, reported an over 100 per cent increase in their net non-performing assets (NPAs) in 2011-12 and the situation may get worst in current financial year 2012-13 according to analysis done by NPAsource.com, a first of its kind portal, which focuses on resolution of stressed assets. Large banks like Central Bank of India (CBI) at over 400 per cent, Indian Bank with 201 per cent, Oriental Bank of Commerce (OBC) at 162 per cent, Corporation Bank with 119 per cent and Punjab National Bank ( PNB) with 118 per cent were amongst those banks which reported a 100 per cent jump in their net NPAs during fiscal 2011-12. Foreign banks like Bank of Bahrain and Kuwait (399 per cent), China trust Commercial Bank (269 per cent), DBS Bank (232 per cent) and Standard Chartered Bank (193 per cent) too figured amongst the banks with very high increase in their net NPA levels. India's largest bank, the State Bank of India too saw its net NPAs shoot up by 40 per cent in during the first half of 2012-13 as against an increase of 28 per cent in the previous financial year ended March 31, 2012."

Banking Tides of 6th March 2012

1. The Government will provide adequate capital to all the public sector banks to help them face risks arising out the global economic uncertainties, according to the finance minister Pranab Mukherjee.
2. The Reserve Bank today said it will soon start issuing banknotes of Rs 1,000 denomination in non-sequential numbering.
3. The Supreme Court judgment cancelling 122 telecom licences has raised question marks over the ability of these companies to repay bank loans running into more than Rs 26,000 crs.
4. The Bihar government has decided to deposit its capital only in banks which pass a test based on the Credit Deposit Ratio (CDR).
5. Finance minister Pranab Mukherjee may have some good news for home-loan borrowers in the 2012-13 budget. The government is considering a proposal to double the tax deduction limit on interest on home loans to Rs 3 lakh per annum.
6. After shares and mutual funds, its now the turn of insurance policies to be digitised, with insurance regulator IRDA expected to give the nod for making policies available in demat form.
7. Private sector lender Axis Bank today said it has raised USD 500 million (about Rs 2,250 crore) through bonds to fund its overseas expansion. The board has passed a resolution approving the allotment of senior notes aggregating to USD 500 million under the MTN (Medium Term Note) programme,

Tides of 31.05.2011

1. Multilateral lending agency World Bank will extend a USD 350 mn soft loan to accelerate development of road network in Karnataka.The Government of India and the World Bank today signed this loan to accelerate the development of Karnataka. The agreement was signed in the presence of Karnataka Chief Minister B S Yeddyurappa.The project is aimed at upgrading 1,231 km of roads into two-lane highways.
2. RBI has permitted Development Credit Bank (DCB) to open 10 new branches. The bank already has 80 branches spread over 17 states and Union Territories while it is in the process of setting up branches in Surat and Bharuch districts in Gujarat.
3. Vijaya Bank plans to install new counters at branches that would offer additional facilities to its customers round-the-clock. As a pilot study, the Bangalore-headquartered bank would initially offer this service in five branches across the country. These are like offering additional features beyond banking hours -- automated pass book entry, cash drop facility, internet banking".Initially, as a pilot study Bank will try them in five branches ...,". The branches would cater to young customers and office goers.
4. The Board of State Bank of Travancore has approved the draft letter of offer for its planned rights issue. It did not disclose the size of the issue.
5. The Delhi High Court has directed the Punjab National Bank to return securities worth Rs.1,000 crore to DLF Limited and slapped a cost of Rs.20,000 on the bank for illegally withholding it. The securities were withheld by the bank as it wanted the company to pay Rs.20 crore pre-payment charges on a loan.
6. Facing shortage of experienced hand, the government has relaxed the criteria for selection of Chairman and Managing Director of public sector banks, a decision that would make several executive directors eligible for elevation as CMD.Under the new criteria, a bank executive director (ED) with a minimum experience of 6 months would also be eligible to become CMDs.Earlier, an ED had to serve a minimum of one year to become eligible for the bank''s top post.
7. In a bid to achieve global status, Indian public sector bank major Central Bank of India has drawn up plans to open its branches in various foreign countries.At present, the bank has a presence at Mozambique in Africa.As part of its global expansion plans, the bank would soon open outlets in Bhutan, Nairobi, Dubai and also in Sri Lanka.
8. U.S. authorities closed a Washington state bank , bringing the total number of foreclosures in 2011 to 44.
9. In order to encourage Indian companies to expand their global footprint and showcase entrepreneurial skills, the RBI relaxed norms for overseas direct investments.The regulations relating to overseas direct investments, are being liberalised "with a view to providing more operational flexibility to Indian corporates having investments abroad".The modified norms will provide greater freedom to domestic companies like Tatas, Bharti and Reliance to increase their commitments in overseas joint ventures and subsidiaries and also help them repatriate funds without seeking prior approval of the RBI."The move is in recognition of entrepreneurial ability of India Inc by the Reserve Bank.

Banking Tides of 20.05.2011

1. With almost every bank having increased lending rates by at least 50 basis points and the SBI leading the pack with a hefty 75 basis points hike in its base and benchmark prime lending rates, bankers believe there could be some slowdown in credit growth this year.
2. HSBC expects India, Singapore and Malaysia, and Indonesia to each deliver over $1 bn in profit before tax in the medium term, joining Hong Kong and mainland China as 'billion-dollar' businesses, to accelerate the bank's growth in the region.
3. Idea Foundation was incorporated as a not for profit organisation under the Companies Act 1956 to promote quality education. The promoters of the foundation are in the business of real estate and construction for last 3 generations. The promoters started educational activities in 2000 in collaboration with Manipal IT Education, and subsequently, it became a university centre for Sikkim Manipal University in 2001. At present IDEA-IMT are having 509 students pursuing various programme offered by Sikkim Manipal University. In the last nine years, 2,350 students have benefited from this initiative. Idea Institute of Management and Technology has a unique industry internship programme spread over2 years, offering seminars, workshops as part of regular programmes. It has modern classrooms and audio-visual equipments. The management invites the best academicians and industry-focused professionals. It also has industry support from ICICI Pru, JKTyres, IL&FS investsmart, Nirma and Rasna, among others.
4. SKS Microfinance has challenged in the Supreme Court the special Act passed by the AP government to regulate micro finance institutions in the state after allegations that their high interest rates and strong-arm recovery methods led to suicides by farmers. An SC bench issued notice to the state government, directing it to file reply and posted the matter for hearing in the third week of July. According to the petition, the state government has no power to regulate the sector. Micro finance sector falls under the central list and is not a state subject on which the AP government could pass any Act, SKS said.
5. India's microfinance sector, under attack for the exploitative lending practices of some of the lenders, is fast losing senior professionals from foreign and private banks. The sector, which once attracted professionals from high-paying jobs in foreign and new-generation private banks, is now facing attrition. Recently, Sanjeev Vishwanathan quit as MD of the Bhartiya Samruddhi Finance (BSFL), a NBFC belonging to the BASIX Group. Chattanathan Devarajan, CEO, Spandana Spoorthy Financial Services, has also put in his papers to join ICICI Bank.
6. The RBI has said NBFCs, who intend to get into primary dealership business, should have minimum net-owned funds, or NOF, of Rs 150 crs. Banks who intend to expand to primary dealership business should have a minimum net worth of Rs 1,000 crs. Primary dealers, or PDs, are specialised traders in govt. bonds who have the market making mandate for govt. bonds and offer two-way quotes on bond trading. The revised guidelines, put up on RBI's website, have also said, in case a primary dealer intends to diversify into other permissible activities, such as brokerage and merchant banking , the minimum NOF shall be 250 crs. The guidelines stipulate that banks should also have ratio of capital to risk-weighted assets, or CRAR, of 9% and net npa or net of less than 3%, in addition to a profit making record for the last 3 yrs.
7. Business sentiment seems to be on a low after delivering the goods for the whole of last year. High interest rates, delays in getting project approvals as well as problems with regard to land acquisitions are some of the factors that have dampened spirits. As a result, new projects are getting delayed and in its place prudent management of working capital and inventory has taken precedence. Though the situation is not "alarmist", as pointed out by an industry watcher, the anxiety is apparent. The value of investment projects completed fell from about Rs 3.5 trillion in 2009-10 to Rs 2.7 trillion in 2010-11, according to CMIE.

Tides of 20.06.2010

1. State Bank of India has said that all the regulatory approvals for the merger of State Bank of Indore with itself will be in place by next month. "We are awaiting approval from the government of India, which is expected any time, may be this month or next month, after that it takes about a month to merge it," SBI Chairman O P Bhatt told PTI. The bank has already got approval from Reserve Bank of India. "We are already doing preparatory work (for the merger)," he said, adding that by July all necessary approvals would be in place.
2. Royal Bank of Scotland Group Plc is in talks to sell its Indian commercial and retail unit to HSBC Holdings Plc as Britain’s biggest government-owned bank accelerates international asset disposals, according to two people with knowledge of the situation. The sides may agree a deal as early as next month, said one of the people, who declined to be identified because the talks are private. The unit has about 1.3 million customers, 1,800 employees and 28 branches, according to the Edinburgh-based bank’s website.
3. Reserve Bank Governor D Subbarao today said mobile banking should be driven by banks, not telecom operators, considering money laundering and terror financing threats. "The Reserve Bank has a clear preference for the bank-led model," RBI Governor D Subbarao said at a Banking Technology Excellence awards function hosted by the Institute for Development and Research in Banking Technology (IDRBT). "Given the growing concerns about money laundering and financing of terrorism, a bank-led model is decidedly safer and more sustainable," he said, adding, however, that a mobile operator-led model helps accelerate financial inclusion.
4. Continuing its selling spree, global financial major Citigroup today offloaded shares of two Sensex firms, Infosys Technologies and HDFC, in block deals valued at Rs 46.08 crore. Foreign fund house Citigroup Global Markets Mauritius sold a total of 1,61,941 shares of Infosys Technologies and HDFC for Rs 46.08 crore. These shares were purchased by The Royal Bank of Scotland NV, according to block deal data available with the Bombay Stock Exchange. As per the BSE data, Citigroup offloaded 1.09 lakh shares of IT major Infosys Technologies worth Rs 30.62 crore and the entity also sold 52,941 shares of HDFC worth Rs 15.45 crore.
5. Indian bank loans rose 19.1 per cent on year as of June 4, the central bank's weekly statistical supplement (WSS) showed on Friday. Deposits were up 14.3 per cent from a year earlier. Outstanding loans rose 578.96 billion rupees to 32.88 trillion rupees in the two weeks to June 4. Non-food credit rose 551.50 billion rupees to 32.36 trillion rupees and food credit rose by 27.46 billion rupees to 521.49 billion rupees, the bank said. Bank deposits rose by 150.82 billion rupees to 45.41 trillion rupees in the two weeks to June 4, the WSS showed.
6. ICICI Bank has filed complaints with the Economic Offences Wing and SEBI against various individuals for spreading rumours of a $1-billion US lawsuit against the bank, which triggered a 3.5% fall in the bank’s share price. ICICI Bank officials said they had tracked down individual rumours and there was a suspicion that rumours were initiated by those who sought to gain from a fall in the bank’s share price. One of the mails was forwarded by an individual to contacts in his googlegroups. The bank had obtained details of the individual who described himself as an investor and said his information was obtained from a website. The investor — a Mumbai-based individual in his thirties — was detained by the police for questioning, bank sources said.
7. South Indian Bank has tied up with Bank of New York Mellon to facilitate remittances from the US to India. VA Joseph, the bank's managing director, said that Malayalam superstar Mammootty, the bank's global brand ambassador, would launch this facility at Kochi on Friday. The South Indian Bank has 580 branches spread across 26 Indian states.

Tides of 27.05.2010

1. Jaipur Stock Exchange (JSE), the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have sent show cause notices to Bank of Rajasthan (BoR). These question the bank for the delay in informing them about BoR’s merger with ICICI Bank.“However, there will not be any impact on BoR’s deal with ICICI Bank, as the board has approved it and all legal procedures have been followed. However, if the regulator feels, it can fine those who delayed in informing the stock exchanges,” said independent equity advisor S P Tulsian.
2. State Bank of India (SBI), which is struggling to meet the regulatory mandate of 70 per cent provision coverage ratio (PCR) by September, has sought a one-year extension to comply with the norm. According to sources close to the development, the country’s largest bank has written to the Reserve Bank of India (RBI) seeking an extension of the deadline till September 2011 to meet the new stipulation. They, however, added RBI was yet to take a call on the issue. Recently, the regulator has provided six months extension, till March 31, to ICICI Bank for achieving the PCR norm. According to State Bank’s internal estimates, it will have to make additional provision of Rs 2,800 crore for non-performing assets to reach a PCR of 70 per cent. At March-end, its PCR was 59.46 per cent, including advances under collection accounts (AUCA). Without AUCA, SBI’s loan-loss coverage is 44.36 per cent, and is seen as a pressure point by analysts tracking the sector.
3. With non-performing assets (NPAs, or bad loans) in the banking sector expected to rise and banks required to achieve a 70 per cent provision coverage ratio by September 30, asset reconstruction companies (ARCs) are preparing for an increase in business. International Asset Reconstruction Company (IARC) is in the process of raising a Rs 400-crore fund to buy distressed assets, with a greenshoe (over-allotment) option to raise Rs 100 crore, according to its Chairman, M S Verma. Domestic investors are expected to contribute Rs 200 crore to the fund. The country’s first ARC, Asset Reconstruction Company (India) Ltd, or Arcil, has already raised Rs 400 crore of its proposed Rs 2,000-crore fund, according to Managing Director & CEO S Khasnobis. Others such as JM Financial ARC and Invent Assets Securitization and Reconstruction are also in the process of drawing up fund-raising plans. There are 13 ARCs in the country. Banks and other financial institutions sell a portion of their bad loans at a discounted rate to ARCs to clean their balance sheets. ARCs pay for these distressed assets either in cash or by issuing a portion of the security receipts (SRs). SRs are interest-bearing securities which entitle the holder to a portion of the recovered amount.
4. The guessing game by banks on each other’s base rate is expected to be over soon when country’s top bankers meet – at the behest of State Bank of India (SBI) – to discuss the new loan pricing mechanism. The meeting would precede SBI’s base rate announcement on June 15, a fortnight before its roll out, SBI Chairman O P Bhatt said today. Most banks are yet to decide about their base rate and the parameters to be taken into account for calculating the new benchmark. A key parameter is the cost of funds, which can cause a huge variance across banks. For example, if a bank takes overnight cost of funds, which is very low, its base rate will also be significantly lower from a bank, which, for example, takes one-year average cost of funds into account. As a result, most banks are eagerly awaiting the move by the country’s largest lender, SBI. This meeting assumes significance, as bankers will get to know what their colleagues in other banks are contemplating and help put in place an industry-wide consensus. Last year, the Reserve Bank of India (RBI) had constituted a committee under Executive Director Deepak Mohanty to review the present system of benchmark prime lending rate. The move was aimed at bringing about greater transparency in risk pricing. The regulator issued the final guidelines in April, but the decision about mechanism was left completely in the hands of banks.

Tides of 26.05.2010

1. Borrowing by telecom companies, which have to pay licence fees to the government, has led to a shortage of liquidity forcing banks to hunt for large deposits. Banks say that by next week lenders may have to seek refinance from the Reserve Bank of India. Reliance on refinance will immediately bump up overnight rates by two percentage points from the prevailing 3.75% to 5.75%, which is the rate at which RBI lends to banks.
2. Govt may allow 100% foreign NBFCs to set up subsidiaries, removing the curbs introduced by the FDI guidelines issued last year.
3. Five-year old Ujjivan Financial Services, a Bangalore-based micro lender with 6.5 lakh poor customers, said it will reduce lending rates by up to 290 basis points from July, as it has earned a profit for the first time since inception. Ujjivan’s announcement comes within a month of Bandhan’s decision to cut interest rates. Bandhan Financial Services is the country’s fourth largest microfinance institution (MFI) with nearly 26 lakh borrowers.
4. The European crisis that plunged global equity markets into the red appears to have deeply impacted the Standard Chartered IDR issue that opened on Tuesday.Of the 20.4-crore Indian Depository Receipts, only 1.11 crore IDRs, or 5 per cent of the total, were subscribed for.This being the first issue where qualified institutional buyers (QIB) had to pay 100 per cent money upfront could have been a reason why institutional response remained subdued, according to analysts. About 12 per cent of the shares on offer to QIBs were bid for.Brokers said that despite their efforts to persuade retail participants to subscribe to the issue, there were few takers. “There is just no excitement for this issue, people think they will not make gains on listing in such a market,” said a retail broker.
5. Lodha Group bids Rs 4,053 cr for MMRDA plot; plans residential complex. The Mumbai-based real estate developer Lodha Group has bid Rs 4,053 crore or Rs 81,818 a sq metre for a 25,000 sqm plot in an auction conducted by the Mumbai Metropolitan authority.
6. The two tribal development programmes, popularly known as Wadi, launched recently by National Bank for Agriculture & Rural Development (Nabard) in Bankura district of West Bengal, are targeted to benefit 1,000 families with sustainable livelihood, according to a Nabard release.The total assistance sanctioned under the programmes is Rs 5.12 crore, including a grant of Rs 4.34 crore and loan component of Rs 40 lakh.The cumulative sanctions under Wadi in West Bengal comprise Rs 33.73 crore of grant and Rs 2.25 crore of loan covering 14 projects in seven districts, totalling 8,566 families.The State Government, through its Backward Classes Welfare Department, has partnered with Nabard in six of the projects with Rs 8.87 crore of grant assistance.
7. Private insurers led by Reliance General are expected to take a hit of around Rs 450 crore from the Air India Express plane crash in Mangalore. The companies had earned a premium of around Rs 110 crore from Air India this year. This was the first time that private insurance companies had provided a comprehensive cover to the country's national carrier. Earlier, public sector players led by New India Assurance provided the cover. Apart from Reliance General, HDFC Ergo, Iffco Tokio and Bajaj Allianz were part of the consortium. Like any large risk, the general insurance companies had reinsured the risk, with Sumitomo being the lead reinsurer, a first for the company. ICICI Lombard had also participated as a reinsurer.
   
   

Tides of 25.05.2010

1. The RBI data shows that bank investment in mutual funds stood at Rs 111,956 crs as on May 7. Banks essentially park funds in liquid mutual fund schemes as the return is a shade better than the return earned by deploying funds in the overnight call money market. Fortnightly trend in data shows that there is a secular rise in such investments over the past three fortnights. According to Andhra Bank executive director Anil Girotra, this a pure fund management strategy by banks and surplus funds are deployed with mutual fund only until there are visible signs of pick-up in loan demand. A recent report by Deutsche Bank notes that there could be demand for funds on account of payment of around Rs 67,000 crore as licence fee by telecos towards payment of license fees for 3G spectrum, besides another Rs 15000-20,000 crore toward the upcoming auction of the broadband wireless spectrum. In addition, there is a likely outgo of around Rs 30,0000-35,000 crore because of advance tax payments starting in the middle of June.

2. The Tirupati Temple in Andhra Pradesh has for the first time deposited 1,075 Kgs
of gold with the State Bank of India (SBI) owing to security concerns.The Tirumala Tirupati Devasthanams (TTD) is an independent trust, which manages temples in Tirupati. TTD officials said they were extremely happy about taking the step due to security reasons, and also for wanting to convert idle gold into a source of income. "This is a great occasion. This is a win-win situation for both SBI and as far as TTD is concerned, this is the best part of it. When the proposal came and we were looking into it, some one or two other counterproposals came which made the SBI to up its interest rates also," said D. K. Adikesavulu, TTD Board Chairman.

3. ICICI Bank, which will see its presence in western India grow with the acquisition of Bank of Rajasthan, has said no to foreign takeovers as it wants to focus on becoming India's top bank in terms of profitability and productivity. "No overseas (acquisition). We are not looking at any prospect (abroad). Internally, our growth strategy is quite India-linked. We are doing just one prospect (deal). I think it is too early to talk of any other prospect," ICICI Bank CEO and Managing Director Chanda Kochhar told when asked which domestic or overseas deals were on its radar. Asked if the latest deal would help her achieve the dream of putting ICICI ahead of number one State Bank of India, she said, "The number one position could be in many ways like productivity, efficiency and profitability. "We are the number one in many of these parameters. Clearly, profits will be a key area to our operations," she said, adding that Bank of Rajasthan would help ICICI Bank not only in terms of branch expansion by 25 per cent but also greater visibility in western and northern parts of the country.

Tides of 24.05.2010

1. SBI has set aside Rs 20,000 crore liquidity for lending to telecom companies that have recently won the bids for 3G spectrum. This will reduce its liquidity to half, assuming that there would be no further outgo other than the Rs 20,000 crore earmarked for telecom operators. Disclosing this to the media in Hyderabad on Saturday, SBI chairman OP Bhatt said for the year ended March, 2010, SBI will be left with 50% of its existing liquidity. Bhatt mentioned that some of the telecom operators, who have bagged 3G spectrum licences, have approached SBI seeking lending. On interest rates, he said it has not hardened so far. But if money for the 3G auctions goes out of the banking system to the government, the liquidity would dry up resulting in the interest rates going up.
2. The boards of ICICI Bank and Bank of Rajasthan (BoR) on Sunday approved the merger of the latter with India's largest private sector bank in a no-cash deal that is valued at about Rs 3,000 crore. The banks have agreed on a final swap ratio of 1: 4.72 one share of ICICI Bank for 4.72 shares of BoR- for the merger. The board considered the results of due diligence covering advances, investments, deposits, properties and branches and employee-related liabilities, and the valuation report of Haribhakti & Co, to arrive at such a swap ratio, said Chanda Kochhar, managing director & CEO of ICICI Bank, adding the bank has to seek permission from RBI and will hold its EGM on June 21 "As per our legal advise we do not need to go to the government for the approval of the Foreign Investment Promotion Board," said Kochhar. This is the first take over by ICICI Bank after Kochhar took over as CEO. Speaking to FE, Kochhar said BoR is a value buying and not a bailout proposition. BoR will add 3 million customers and start contributing to the profit of ICICI Bank from next year. "By diluting 3% equity , we are adding 25 % of more branch network at one go. BoR will augment ICICI Bank's loan book and deposits by around 8% each. We have now the largest number of branches among the private sector banks," she added. ICICI Bank's valuation of BoR is on the basis of Rs 6 crore per branch On BoR's sticky assets, Kochhar said, "We have verified all the details". Pravin Tayal, who was asked by RBI to dilute family's over 55 % equity to about 10%, said "no decision" has been taken on his representation the ICICI board after the merger. "I respect the amalgamation scheme decided by the Board," he said. With BoR board approving the swap ratio the proposal will now go to the Extraordinary General Meeting (EGM) slated on June 21, BoR director KN Bhandari said. Asked whether the merger will adversely impact BoR employees, Bhandari said, "All BoR employees will be retained and there will no job losses."
3. Standard Chartered on Sunday said it has fixed the price band for its proposed issue of 240,000,000 Indian Depository Receipts (IDRs) at between Rs 100-115 per IDR. The issue, which will remain openfrom May 25 to May 28, will raise up to $588 million. The bank has revised the target, which was earlier set at $750 million. Retail investors and eligible employees subscribing to the IDRs under the retail and the employee portion respectively, and whose bid amount does not exceed Rs1,00,000, will benefit from a further 5% discount to the final issue price, a bank statement said. Allotment of the IDRs is scheduled to be completed by June 7, with listing on the Bombay Stock Exchange and the National Stock Exchange shortly thereafter. In late March, StanChart said it aimed to raise at least $500 million and not more than $750 million in its IDR sale. Since then, London-listed shares in the lender have fallen nearly 9% amid a broader global selloff. Ten IDRs will represent one underlying share of the company, and the new shares issued in aggregate would constitute 1.16 % of its post-issue paid up capital,the statement said. "The issue of IDRs is a more brand-building exercise than capital mop up," the bank said. Capital Markets Ltd has been named as the co-book-running lead manager (co-BRLM). The Co-BRLM will only be involved in the marketing of the issue, the statement said.