Tides of 5.07.2015

 1.  RBI asks banks to use information from CRILC to open current account : With a view to improve credit discipline and reduce NPA level, the Reserve Bank today asked lenders to make use of credit information available with Central Repository of Information on Large Credits (CRILC) for opening of current accounts.  
Banks are advised to make use of the information available with CRILC and not limit their due diligence to seeking NOC from the bank with whom the customer is supposed to be enjoying the credit facilities as per his declaration, it said in a notification.

2.   RBI may give payment bank licence to postal department in August:

 Ravi Shankar Prasad, Union Minister Ravi Shankar Prasad today said he expects Reserve Bank of India (RBI) to grant payment licence to the proposed Post Bank of India by August.
This will enable the network of 1,54,000 post offices (including 1,30,000 rural post offices) to offer banking services to the masses in the country.
"We expect RBI to give payment bank licence to post (department) in August," Minister of Communications and IT Prasad said.

3.   In last one year, the Department of Post (DoP) has networked 27,215 post offices into one national unit through computers.  The DoP, which has applied for a payment bank licence, has a hybrid model in mind to operate Post Bank of India. As per RBI guidelines, payment banks would offer a limited range of products such as demand deposits and remittances. They will not be allowed to undertake lending activities.

Tides of 4.07.2015

1.   During June 2015, two important speeches were delivered by Dy.Governors of RBI.

(i)        Financial Education: Basics and Beyond - Keynote Address  delivered by Shri S. S. Mundra, Deputy Governor, Reserve Bank of India at the Conference on Financial Literacy organised by  College of Agricultural Banking at Pune on June 15, 2015
(ii)       Financial Frauds – Prevention: A Question of Knowing Somebody - Speech delivered by Shri R. Gandhi, Deputy Governor at “2nd National Conference on Financial Frauds Risks & Preventions” organized by ASSOCHAM on June 26, 2015 at New Delhi

2.   Liberalized Remittance Scheme: RBI issued circular which state that AD banks may now allow remittances by a resident individual up to USD 250,000 per financial year for any permitted current or capital account transaction or a combination of both vide RBI/2013-14/620 A.P. (DIR Series) Circular No. 106 A.P. (FL Series) dated 1^st June, 2015.

3.   Pre-2005 series bank notes: The Reserve Bank of India has extended the date for the public to exchange their pre-2005 banknotes till December 31, 2015.

4.   CBDT has issued a circular which indicates that henceforth Concurrent Auditors, who are chartered accountants, of branches below the cut-off point will submit LFAR only to the Chairman of the bank. The banks in turn will consolidate/compile all such LFARs submitted by the Concurrent Auditors and submit to Statutory Central Auditor as an internal document of the bank vide RBI/2014-15/626  DBS.CO.ARS.BC.8 /08.91.001/2014-15 dated 4^th June,2015.

5.   SBI hikes its digital focus.
The country’s largest lender, State Bank of India (SBI), plans to launch 250 InTouch Lite branches as part of an overall digital momentum. InTouch Lite is a lighter version of the bank’s full-sized digital branch with a smaller screen size.

SBI chairman Arundhati Bhattacharya said not only was the bank going slow on new branches, but the entire branch network would undergo a transformation.
“So, there will be changes in the branch format. There will be changes in the branch location as well, depending on where the habitation is moving,” she said.

SBI accelerated its digital journey formally from July 2014 by opening InTouch branches, converting the brick and mortar branch into a digital space.
The bank hopes to appeal to country’s youth population with the new digital branches, especially in areas with a high population of young professionals.

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."