Tides of 8.07.2015

1.   To strengthen physical security and surveillance and increase the efficiency of incident response, State Bank of India has decided to hook about 6,000 of its ‘critical and high-value’ branches across the country to a central monitoring system (CMS).To achieve integrated monitoring, India’s largest bank will divide the 6,000 identified branches, spread across 14 circles, into 5 clusters. As at March-end 2015, the bank had 16,333 branches.Facilities in each cluster will be remotely monitored 24x7x365 from the CMS for detecting any eventuality such as fire, theft, intruder detection, burglary, vandalism, and unauthorised activity. Considering the complexities involved and increasing physical security threats, it was necessary to review the current security system and adapt industry best practices and technologies, as per a bank document.Each cluster of branches will have a separate outsourced CMS. All the security systems at the branches — CCTV, fire alarm sensors, intruder alarm sensors — will be integrated with the CMS for real-time monitoring. Event-based alerts will be sent by the branch security system automatically to the CMS for appropriate resolution.SBI’s current surveillance system is a de-centralised system, thus not having any capability to send distress signals or CCTV feeds to any other branch/central monitoring station.

2.    SBI Life Insurance, the 74:26 joint venture between the State Bank of India (SBI) and BNP Paribas Cardif, is targeting a 30 % growth in first year premium this fiscal. According to Arijit Basu, Managing Director and CEO, SBI Life, the growth will come through the ‘bancassurance’ (selling of insurance products through banks) model; followed by growth in retail. While the ‘bancassurance’ model is expected to grow at 45%; retail is likely to grow at 20% .At present, the two models account for nearly 95% of the insurer’s business; with ‘bancassurance’ being the major one.

3.    The passage of the long-pending Insurance Laws (Amendment) Bill, 2015 — which has increased the cap on foreign direct investment in the insurance sector from 26% to 49% — has now set the ball rolling for Indian promoters to offload some of their stake to their foreign partners.SBI — India’s largest lender— has decided to dilute its stake in both life and general insurance businesses. The bank has informed the BSE that the executive committee has authorised divestment of its stake in SBI Life Insurance by up to 10%. A few days ago, it had also decided to dilute its stake in SBI General Insurance from 74% to 51 % in favour of its foreign partner Insurance Australia Group (IAG).

4.    The Indian Finance Ministry has gone back to an old faithful, much loved by the common man. Yes, the Rs. 1 currency note is making a comeback after two decades.The new avatar unveiled by the government in March is made of cotton rag with 110 micron thickness. It has the watermark of Ashoka’s Lion with ‘Satyameva Jayate’ inscribed and carries the signature of the present Secretary, Ministry of Finance, and is dated 2015. Banks have also started distributing these notes in select locations.In December 2014, the government had announced that Rs. 1 notes will be issued and will be brought back in circulation. The government prints the Rs. 1 currency, while the RBI prints all other currency notes, according to the RBI Act.The re-launch of Rs. 1 notes, has also brought old notes to life. Whether old or new, the banknotes are legal tenders and people can use them freely.

Tides of 7.07.2015

1.   State Bank of India has over three million home loan customers with a portfolio of over Rs 16,60,000 crs.

2.    Reliance Capital Asset Management Company (RCAM) and ICICI Securities Primary Dealership have been selected to manage Rs 60,000 crs provident fund corpus of coal industry workers. The decision was taken by the board of trustees (BOT) of the Coal Mines Provident Fund Organisation (CMPFO) in its meeting, chaired by Coal Secretary Anil Swarup, who is the Chairman of BOT. Out of the four -- SBI, UTI, RCAM and ICICI Securities , RCAM and ICICI have been selected for management of about Rs 60,000 crore provident fund corpus of the coal industry workers. Both RCAM and ICICI have emerged as the lowest bidders in the financial bids. Earlier the four managers had qualified for the financial bid after clearing the technical round. A member of the trustees said there are about 4.5 lakh members of the CMPFO and the corpus fund would further increase from about Rs 60,000 crore as about 62,000 contract coal workers have been added to the fold.

3.    National Payments Corporation of India (NPCI) and JCB International Co. Ltd, a subsidiary of Japan's JCB Co. Ltd., are entering into a partnership for payment cards issuance and acceptance. Under the pact, JCB cards will be accepted at all NPCI locations in the country. The partnership will also include the issuance of RuPay/JCB international cards by NPCI member banks that will be globally accepted through the JCB network.  The two sides target to launch JCB acceptance business around the middle of next year and RuPay/JCB International card issuing business later in 2016. NPCI also has another partnership with US-based Discover Financial Services card network for international acceptance of RuPay cards.

4.    Banks have welcomed new rules that could allow them to take majority stakes in troubled companies as a warning to wayward entrepreneurs, even if the provisions will not apply to the bulk of struggling loans from past years. The RBI which has long sought to make majority shareholders more responsible for any failures, allow lenders to turn loans to defaulting companies into equity in those firms of 51% or more.

5.    India Post, which has started issuing personalised debit cards to its savings account holders, is planning to issue 5 lakh new debit cards over the next two months.  To start with, the account holders will be able to use these cards only at 115 India Post ATMs.For now, these cards can be used at our ATMs only. Once inter-operability is allowed, it can be used at other ATMs also. India Post is looking at opening 1,000 additional ATMs by March-end. It has 25,000 branches across the country and some 34 crore account holders from CBS-enabled and non-CBS branches. Their plan is to complete implementation of CBS at all our 25,000 branches by March 31, 2016.

Tides of 6.07.2015   

1.   Challenges for PSU banks remain despite uptick in economy. Fitch Ratings' said challenges for state-owned banks remain despite improving macro picture. "The performance of India's state bank sector remained challenged in FY15 (to end-March 2015), with continued pressure on asset quality and weak capital," according to Fitch Ratings' Indian Banks Report Card FY15. Capital needs are likely to increase substantially each year up until FY19, it said adding there were few indications of a meaningful recovery in earnings in the short-term, though stressed assets are likely to have peaked and NPL (non-performing loan) accretion is easing. "A difficult year for Indian banks in FY15 was characterised by weak credit demand despite a gradually improving macro picture. State banks in particular continued to face asset-quality pressures, falling profitability and weakened capitalisation on an adjusted basis," it said. System-wide loan growth, at 9.7% was the lowest over the past decade, and concentrated mainly in retail and farm credit. The system NPL ratio rose to 4.6 per cent of total assets from 4.1% in FY14, though the bulk of the deterioration was accounted for by restructured loans, as expected. Consequently, the broader stressed-assets ratio (which includes performing restructured loans) spiked to 11.1%, from 10%. "Nonetheless, the outlook for FY16 is more positive for Indian bank credit. The system-wide stressed-assets ratio is likely to begin falling against the backdrop of a more favourable economic environment. "Gross NPL accretion has already shown signs of deceleration, and we forecast GDP growth to gain momentum and rise to 7.8%," Fitch said.

2.    Kotak Bank expects up to 20% growth in corporate loan book in FY16. Even as big-ticket loan demand continues to be tepid, private sector lender Kotak Mahindra Bank is confident of maintaining up to 20% growth in corporate loan book this financial year. The demand will be split evenly between term loans of slightly longer duration as well as working capital loans, and has a bias towards taking balance sheet-led term-loan exposures wherein it sees a company's balance sheet strength to service the debt. It can be noted that the slowdown in corporate demand in the last few years has led to a lot of banks focusing on retail segment. The bank acknowledged that the demand is slower and attributed it to the sluggish economic growth due to which greenfield projects are not coming up and also disintermediation, wherein better-rated corporates are going to money market alternatives to raise money rather than from banks. The bank has not revised its conservative approach when it comes to segments like infrastructure which have reported problems in the past.  The corporate and investment banking vertical is not aimed at loan growth alone. The vertical is for focusing on the needs of a large corporate across financial services and will also help the bank earn fee income through services like debt capital markets and investment banking, he said. Kotak Bank had recently cut its base rate by 0.10%, taking its cumulative cuts to 0.25% during the fiscal. On fears of losing business to larger rivals like ICICI Bank, HDFC Bank and SBI who have lower base rates, Kotak Bank can compress its spreads over the base rate to book loans. 

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.