Tides of 29.01.2008

1. Reliance Money is aiming to take up the distribution reach of the company to all the 5,645 tehsils of the country after having succeeded in mobilizing 10 lakh plus IPO applications for the Reliance Power that concluded recently.Reliance Money a subsidiary of Anil Dhirubhai Ambani Group Company, Reliance Capital and is into equity broking and distribution of IPO, mutual funds, insurance and other financial products.

2. The life of the central banker has never been more difficult and challenging.In the good old days, it was enough if he focused on the domestic economy, its growth prospects and inflation, while cocking an eye on the current account and exchange rate. Last week, the US Federal Reserve, in a rare move, cut its benchmark Fed Funds rate from 4.25 per cent to 3.5 per cent in one go. And this was even before Wall Street opened. The collapse of Asian and European markets before US trading began set off alarm – if not panic – bells in the Fed, prompting its pre-emptive action.

3. Kotak Mahindra Life Insurance plans to sustain a growth of around 100 per cent in new business premium over the next year.In the first nine months of the fiscal, the company has raked in new business premium of Rs 560 crore (in terms of annualised premium equivalent where single premium is given only 10 per cent weightage), which is a growth of 80 per cent against the previous year. The company has reported a net loss of Rs 67 crore in the first nine months of the fiscal.

4. The General Insurance Corporation of India (GIC Re) has inaugurated its branch office in London. The Finance Minister, Mr P. Chidambaram, who inaugurated the office described it as a “giant step” in the international expansion of GIC Re. A press release quoting Mr Chidambaram said, “It is our goal to make GIC Re a world-class reinsurer. It already offers reinsurance support to a 1,000 insurance companies”. The London branch is the second representat ive office of the reinsurer to be upgraded to a branch. Its Dubai office was upgraded to a branch in February 2007.

5. United Bank of India (UBI) proposes to launch what it calls ‘financial clinics’ one each in the four metros — Kolkata, New Delhi, Mumbai and Chennai — to push not only the bank’s own retail products but also mutual funds and insurance policies of other companies, and various other investment instruments. “However, the clinics will target mainly the elite customers; i.e. those who have at least Rs 1 lakh to spare, to advise them how to get the maximum value of their money and better returns.” Each clinic would be located in the bank’s respective regional office.

6. The BNP Paribas Group has injected around Rs 570 crore (€500 million) in its Indian operations in the recently concluded quarter.With this latest equity infusion, the capital base of the bank will be enhanced to Rs 1,600 crore, said a press release from the group.This is in addition to the group’s investment in various joint ventures in the country over the last three years.

7. Rise in retail prices of fuels could raise inflation from below 4%. In an indication that it may hold back a policy rate cut tomorrow, the Reserve Bank of India (RBI) on Monday said inflation in India was artificially “suppressed” as higher international oil prices have not been passed on to domestic consumers.

8. In a double whammy for two-wheeler makers, whose sales fell nearly 8 per cent in April-December last year, leading financiers have put their products in the high-risk category. The consequences have been dire. Leading outfits like ICICI Bank and HDFC Bank have raised the down-payment to 30 per cent — earlier, there were schemes against a down-payment of just Re 1 — and tightened lending norms, with the result that their exposure to two-wheelers has fallen nearly 20 per cent so far this financial year. Besides, finance companies are also trying to enforce belt-tightening at dealer outlets.

9. Bank of Baroda (BoB) will establish a wholly owned subsidiary in New Zealand to expand its footprint in the Asia-Pacific region. Initially, the public sector bank plans to pump close to $20 million (25 million NZD) in the new entity. BoB will first cater to the needs of the Indian diaspora in the New Zealand capital, Auckland, and then gradually expand its franchise and branch network. Operations will begin in early FY09. The bank is in the process of obtaining a ‘retail deposit taking’ banking licence from the Reserve Bank of New Zealand and completing other incorporation formalities. Fitch Ratings has assigned an expected long-term foreign currency issuer default rating of ‘BBB-’ (BBB minus) to proposed subsidiary in New Zealand.

10. National Housing Bank (NHB) is partnering US-based AIG United Guarantee, Asian Development Bank (ADB) and International Finance Corporation (IFC) to set up India’s first mortgage guarantee company. The company is likely to launch operations in March. According to the agreement arrived among the partners a few months back, NHB will hold 43 per cent stake, United Guarantee 41 per cent while ADB and IFC will hold 8 per cent stake each in the the joint venture company. “The shareholding requires internal approvals from each partner company. We will be approaching the Reserve Bank of India for registration after it releases the final guidelines for mortgage guarantee companies.”

Tides of 28.01.2008

1. The net profit of Federal Bank grew 22.7 per cent to touch Rs 102.92 crore for the third-quarter ended December 2007.The bank posted close to 50 per cent growth in interest and other income. Interest expenditure increased by over 67 per cent. The net interest margin was at 3.17 per cent and net interest income grew by 14 per cent.

2. Punjab National Bank (PNB) is in talks with Asset Reconstruction Company of India Ltd (Arcil) to shed some of its non-performing assets (NPAs) through this route. The bank is looking to pare its NPAs to one per cent of advances by end March 2008 from the level of 1.33 per cent as on end-December 2007.

3. The Asian Development Bank (ADB) will provide a $350 million loan to improve urban infrastructure and services in 31 towns and cities in Uttarakhand, which is one of the country's top tourist destinations. The Manila-based regional development bank has identified Uttarakhand as one of its priority States in India as its development was lagging behind other States. Improved urban services are needed to support tourism and industry - two economic sectors with substantial development potential in the State.

4. The accretion to the country’s foreign exchange kitty continued, as reserves increased by $3.169 billion to $284.898 billion, for the week ended January 19. The rise is mainly due to the central bank buying dollars in order to keep the rupee from appreciating as well as due to currency revaluation. The increase is less than the previous week’s rise of $5.47 billion, when the total foreign exchange reserves touched $281.73 billion.

5. Insurance fortnight is being observed in the Vishakapatnam branch of Dhanalakshmi Bank . It was inaugurated by Mr P. Krishna Prasad, of the Pydah Engineering College. He said the bank has tied up with Metlife for selling life insurance products and during the fortnight efforts would be made to make the customers aware of the necessity for insurance.

6. ING Vysya Bank’s net profit jumped 198 per cent for the third quarter of the current financial year to Rs 42.75 crore. The increase was partly driven by exceptional revenues of Rs 18.38 crore from sale of a non-banking asset. Gross profits in the third quarter were Rs 72.35 crore, up from Rs 21.32 crore.But gross revenues improved to Rs 528.06 crore from Rs 370.87 crore during the corresponding quarter of the last financial year. The improved gross revenues were driven by improved interest and fee-based incomes.

7. During the quarter ended December 31, 2007, UCO Bank posted a lower net profit of Rs 82.78 crore as compared to Rs 122.95 crore in the same period last year. It would attribute the drop to higher provisioning — Rs 22 crore in respect of some accounts which had been upgraded as per norm and another 34 crore on account of MAT. The operating profit during the period amounted to Rs 197.58 crore (Rs 231.38 crore).The net interest income amounted to Rs 378 crore (Rs 415 crore) and other income Rs 149 crore (Rs 113 crore). The treasury income was Rs 67 crore (Rs 24 crore) and fee-based income Rs 52 crore (Rs 46 crore). The net interest margin was 1.9 (2.42).

8. Taking a cue from the US Federal Reserve which cut the interest rates by 75 basis points, the Fedearation of Indian Chamber of Commerce and Industry and the Confederation of Indian Industry have urged the Reserve Bank of India to signal interest rates cuts by 25-50 basis points. “With inflation under control and hovering around three per cent, it is the right time for the RBI to cut repo and reverse repo rates that are currently at 7.75 per cent and six per cent respectively by 25-50 basis points to cover the relative competitive disadvantage India has on the macro economic fundamentals. “This move would strengthen the economic fundamentals and also boost investors’ confidence,” said the CII President, Mr Sunil Bharti Mittal, in a statement.

9.Punjab National Bank (PNB) plans to raise further capital of about Rs 1,500 crore before end-March to fund business growth. It will do it only through Tier-II capital as it has headroom there. It will not be through tier-I perpetual bonds. PNB has till date in the current fiscal raised Rs 1,100 crore through tier-I perpetual bonds. This includes the Rs 300 crore bonds raised last week at a borrowing cost of little over 9 per cent per annum.

10. Federal Bank opened its first overseas representative office in Abu Dhabi recently . The office was inaugurated by Mr Vayalar Ravi, Union Minister for Overseas Indian Affairs. Mr M. Venugopalan, Chairman of the bank, said with the opening of the office in the UAE, the bank would be providing single window facility to its NRI clients in the Gulf region. The UAE region also contributes 20 per cent of the deposit base of the bank at Rs 4,000 crore. “This is the first overseas effort of the bank to follow the customers to wherever they live. And moving closer to the customers has always been a top priority of the bank,” Mr K.S. Harshan, ED, said. With the introduction of the representative office closer to the NRI customers, the bank has targeted a growth in overseas business volumes of over 30 per cent from the region in the following years.

Tides of 17.01.2008

1. State Bank of Mysore (SBM) reduced its gross non performing assets (NPA) in the third quarter (Q3) of the current financial year (2007-08) by Rs 31 crore on a year-on-year basis.
Speaking to Business Line, SBM’s Chief General Manager, Mr Dilip Mavinkurve, said, “We upgraded some accounts under Corporate Debt Restructuring. Besides, this year we recovered close to Rs 100 crore including some big ticket accounts.” As a result the bank’s gross non performing assets dropped to 1.83 per cent of the gross advances, down sharply from 2.51 per cent of the corresponding period of the last financial year and 2.87 per cent from Q2 this year.
The recoveries buoyed SBM’s gross profits to Rs 136.15 crore in Q3, a 54 per cent increase over the corresponding period of the last financial year. Net profits grew 25 per cent during the same period to Rs 70.91 crore.

2. Spurred on by higher net interest income, LIC Housing Finance Ltd reported a 38-per cent increase in Q3 net profit at Rs 106.02 crore, against Rs 76.61 in the corresponding quarter of the previous year.

3. Spurred by the boom in the infrastructure sector, Infrastructure Development Finance Co (IDFC) has reported a 72-per cent increase in its net profit for the quarter ended December 31, 2007, to touch Rs 198.67 crore, as against Rs 115.15 crore last year.

4. Private sector general insurance companies improved their market share to 40 per cent, powered by the once shunned motor insurance business for the first eight months of the current financial year.According to the data released by the Insurance Regulatory and Development Authority (IRDA), private sector insurers’ gross premium accretions during the period was Rs 7,352.84 crore, a growth of 26.5 per cent over the corresponding period of the last financial year. Public sector insurers’ premium accretions for the same period were Rs 11,156.19 crore, or a growth of 3.81 per cent. The entire industry grew by only 11.77 per cent, during the period, implying that the bulk of the growth was cornered by the private sector companies.

5. United Bank of India will henceforth sell the export credit insurance products of the Export Credit & Guarantee Corporation of India Ltd through its network of branches. This follows the signing of a corporate agency agreement between the two organisations .

6. For the first time, Allahabad Bank will opt for perpetual bond to raise Rs 300 crore. “It is Tier I capital and we will issue it in the current quarter itself”, Mr A.C. Mahajan, CMD of the bank, told newspersons here on Wednesday. The bank’s Tier I capital, as a result, will rise to more than Rs 4,633 crore. The additional resources, as the CMD pointed out, would be needed to meet the increased demand for credit.

7. Grameen Capital India Ltd calls itself the ‘investment banker’ for the poor much like the Nobel Laureate, Dr Muhammad Yunus, called himself the banker of the poor.
The company, which launched its operations in Mumbai on Monday, is a joint venture in which Grameen Foundation, US and IFMR Trust hold 43 per cent stake each and Citicorp Finance India 14 per cent. The initial capital would be Rs 5 crore.Grameen Bank India will help micro finance institutions (MFI) gain wider access to domestic capital markets through securitisation and syndication of micro-finance loans, proactive engagement with rating agencies, and capital advisory services to MFIs for raising low-cost on-lending funds. It will offer IPO advisory and management services as well as help in private placement.

8. State Bank of Travancore (SBT) registered a 27.49 per cent rise in net profit during the first nine months of the current fiscal. For the nine months ended December 2007, the net profit was Rs 236.91 crore as against Rs 185.82 crore during the corresponding period in the last fiscal, says an SBT press note. This increase is mainly on account of a 27.17 per cent year-on-year growth in non-interest income, the release adds. SBT’s total income during the first nine months of the current fiscal touched Rs 2,811.84 crore as against Rs 2,147.22 crore in the corresponding period in the last fiscal. Total business touched Rs 61,241 crore in December 2007 as against Rs 53,644 crore at the end of December 2006. The gross NPA declined from 2.47 per cent in December 2006 to 2.14 per cent as of December 2007, while the net NPA declined from 1.26 per cent to 0.97 per cent.

9. Punjab National Bank (PNB) plans to raise Rs 300 crore through tier-I perpetual bonds on private placement basis this week, taking the overall amount mobilised in the current fiscal through this route to Rs 1,100 crore.The bank had raised Rs 500 crore through perpetual tier-I bonds in July 2007 at an annual coupon rate of 10.4 per cent. In December 2007, PNB had raised another Rs 300 crore through the same instrument, the annual borrowing cost for such bonds being lower than the 10 per cent level.

10. The banking system is being asked by the regulator, the Reserve Bank of India (RBI), to become more customer-friendly. The banks have been asked to consider a four-tier institutional machinery, covering all levels from the branch to the board, to improve standards of customer service. Inaugurating the 1001th branch of Vijaya Bank here on Monday, Mr V. Leeladhar, Deputy Governor of RBI, said that the institutional machinery within the banks in the area of customer service should comprise a customer services committee on the board, a standing committee on customer service, a nodal department or nodal official in the head office and each controlling office, and a branch-level customer service committee.

Tides of 14.01.2008

1. Indian Bank has reported a net profit of Rs 307.5 crore in the October-December quarter which is 61 per cent higher than the Rs 190.5 crore recorded in the comparable quarter of last year.A significant contribution came from ‘other income’, which rose 72 per cent to Rs 300.59 crore from Rs 175.1 crore earlier. It is learnt that the bank has settled “a long-standing big ticket NPA issue” and has received a substantial sum from it.

2. The State Bank of India has assured exporters that dollar transactions with Iranian buyers can be settled through its six correspondent banks in Iran. Following the US ban on large Iranian banks, SBI had not been accepting letters of credit from Iranian importers for the past couple of months.

3. Interest rates could soften by 25 basis points to 50 basis points if there is no hike in the cash reserve ratio, said Mr Deepak Parekh, Chairman, HDFC Bank, speaking to reporters on the sidelines of the Global Trade & Investment Conference of the Indian Merchants Chamber on Friday.
“India is a resilient economy but it is not completely immune to the global events. These global events will definitely affect us to a certain extent,” he said, addressing the conference. Mr Parekh said that India may not witness the flood of forex going forward as has been the case in the recent past because investors in India were cashing out and there was lot of redemption in the US.

4. The foreign exchange reserves rose by $ 696 million to touch $2.76 billion for the week ended January 4, due to an increase in foreign currency assets.The reserves had increased by $2.837 billion in the previous week ended December 28, 2007.

5. IT trade body Nasscom has partnered with ICICI Bank to float a closed-ended fund with an initial corpus of Rs 100 crore for investing in early stage companies and emerging technologies.

6. Certificate of Deposits issued by banks have vaulted over the past three years.The total amount of outstanding Certificate of Deposits (CDs) issued by banks in November 2007 stood at Rs 1,25,635 crore, around 80 per cent higher than Rs 67,694 crore in November 2006. That in turn was 130 per cent higher than the Rs 29,345 crore level at which it stood in November 2005. Market participants say that earlier only the nationalised banks and a few private banks were issuing CDs, but now many more banks are contributing to the increase in supply of CDs. They see its virtue in better balancing the maturity profile of their assets and liabilities .

7. Despite the rhetoric of financial inclusion, the top 100 centres in the country dominate in terms of credit and deposit.As per the ‘Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks – September 2007’ released by the RBI, today, the share of these centres has increased both year-on-year and sequentially from March 2007. The share of the top 100 centres in credit has gone up from 75.9 per cent in September 2005, to 76.7 per cent in September 2006 and to 77.2 in September 2007.

8. In an apparent bid to ensure that banking operations are not affected by the proposed countrywide strike by bank employees on January 25, the Centre has invited the representatives of the United Forum of Banking Unions (UFBU) and the Indian Banks’ Association (IBA) for conciliatory talks on January 22.

9. Contrary to popular belief, it was a public sector bank that walked away with the award for the best use of information technology in retail banking at the IBA & TFCI: Banking Technology Awards 2007, held on January 9, in Mumbai. Corporation Bank was the winner in this category, followed by Axis Bank as the runner-up.Awards were given for 15 different categories and the winners included a cross-section of banks such as public sector banks, foreign banks, private banks and even co-operative banks.

10. Catholic Syrian Bank has selected Sun Microsystems to implement its core banking solution (CBS) that will help customers access the bank’s services through the Web, branch or ATMs (automated teller machines).

11. The Catholic Syrian Bank has been observing the current financial year 2007-08 as ‘Relationship Year’ and as part of this program it has been opening ATMs at main tourist and pilgrim centres in the country.

12. Life Insurance Corporation of India plans to tie up with management institutes to offer its employees a special MBA programme.

Tides of 10.01.2008

1. The Institute of Financial Management and Research (IFMR) today launched the ‘IFMR Trust’. The Trust will “create and manage funds which will invest in commercial enterprises that leverage the competitive strengths of low income households.”IFMR already runs initiatives towards building channels to deliver financial and other services in rural remote locations. It has already invested around Rs 30 crore in seven commercial enterprises focussed on low income households and expects to raise the investments to Rs 600 crore by March 2009.

2. Banks must implement strong IT governance practices to ensure that that their technology projects do not adversely impact their performance, according to senior bank officials at Banknet’s “Fourth International Conference on Payment Systems,” held here on Wednesday.
Strong information technology platforms call for calculated and discrete measures from banks. “Banks are faced with two major risky propositions – the pace at which their businesses are growing and the pace at which technology changes,” according to Mr Ravikiran Mankikar, Chief Technology Officer, Shamrao Vithal Co-operative Bank. This makes it imperative for banks to have strong wraps of governance surrounding their IT practices.

3. South Indian Bank (SIB) has recorded a 64 per cent increase in net profit during the third quarter of the current year as compared to the corresponding period of the previous year.
The net profit was Rs. 40.72 crore for the 3 month period ended December 31, 2007, as against Rs. 24.84 crore last year.

4. Higher interest income and better net interest margin enabled Axis Bank to report a 66 per cent growth in its net profit for the third quarter ended December 31, 2007.The net profit increased to Rs 306.83 crore from Rs 184.61 crore in the corresponding quarter of the previous year.

5. Grappling with issues of change management, innovation for new delivery channels and broadening the range of services portfolio — both internal and external, the banking sector in the country, like its peers across the world, is taking to business transformation solutions.With the Indian banking sector poised to open up further by welcoming global competition, consolidation has gained momentum. This now means that the large banks, with disparate systems, cannot any longer assume that the current rate of growth and returns will continue given the nimbleness of some of the new players and the likely competitive environment in the financial services business.

6. The Indian banking sector is at a watershed. Brisk economic growth is opening up unprecedented opportunities. Several Indian banks are pursuing global strategies, as Indian companies globalise and people of Indian origin increase their investment in India. At the same time a number of global banks have stepped up their focus on India, keen to participate in the sector’s growth. Today, the question often asked is how competitive are Indian banks and do the practices at work in these banks compare against global best practices. To assess this, McKinsey & Co launched five proprietary surveys with help from the Indian Banks Association to profile leading Indian banks. The surveys administered were The McKinsey Personal Financial Services Survey; Excellence in Retail Banking Survey; IT Benchmarking Survey; Organisational Performance Profile Survey; and Asset-Liability Management Survey.

7. Raise a question on size to any of the old private bank chiefs, and all of them defend their space strongly. The common refrain – “We too have a role to play. We cater to a niche segment and there is room for growth. A vast majority of our populace still remain unbanked, under-banked. Small-size banks exist even in developed economies.”

8. Lakshmi Vilas Bank today announced the roll out of its 200th CBS branch. It has a branch network of 236 across 11 States and one Union Territory. The bank plans to unveil technology-driven products and multi-city cheque facility soon, besides providing Internet and mobile banking facility.According to a press release, the RBI has permitted the bank to open 15 new branches across the country by May 2008.

9. Exim Bank of India has entered into a line of credit (LoC) agreement for $45 million with the Government of Vietnam to finance construction of a power project in Vietnam. Bharat Heavy Electricals Ltd will construct the 200-MW Nam Chien Hydropower Project, at Son La Province. This is the second line of credit extended by Exim Bank to Vietnam, said a press release from the bank. The first LOC of $27 million was utilised to finance export contracts such as supply of equipmen t for cold rolling steel plan, hydropower plants, tea processing machinery and textile machinery from India to Vietnam.

10. Loss levels in small ticket personal loans and a portion of credit card receivables, which are currently at 7-9 per cent, could rise to 10-13 per cent in three years, said a report by Crisil Ratings.Terming this segment as ‘sub-prime’ assets in the Indian context, the report said that these are unsecured loans between Rs 5,000 and Rs 25,000-30,000. Of the total credit card receivables, about 15-20 per cent falls in the profile of low income groups.

Tides of 4.01.2008

1. An analysis of US dollar return data shows that Indian bourses have delivered the third highest gain of 71.23 per cent during last year.

2. Long distance transfers of peons and sweepers in the Industrial Development Bank of India (IDBI) has created unrest among the employees, who have challenged the transfer policy by threatening to go on an indefinite strike. The crisis erupted 13 months after the merger of erstwhile United Western Bank (UWB) with the IDBI. The union alleged that the bank is resorting to transfers in order to compel the former UWB employees to submit resignation.

3. Strategic alliance between Oriental Bank of Commerce, Indian Bank, and Corporation Bank is not progressing as was envisaged, and change of guard at the top level is responsible for this, officials familiar with the development said. Christened as OIC, the alliance that was launched in 2006 has made very little progress in the last one year and a half. The tie-up was touted as an alternative to mergers among Indian public sector banks. The alliance had planned several new initiatives such as forging a joint venture for credit card business, jointly opening subsidiary abroad, among others. All these plans have taken a backseat now. “All these banks are small ones, which are chairman driven and not system driven. Change in the top management of some of the partners has affected progress of the alliance,” the official said. The idea of having a common OIC logo for the alliance has also been scrapped.

4. United Bank of India (UBI) has committed an investment of Rs 250 crore on information technology for the next financial year. The investment will cover a massive roll out of core banking solutions (CBS), on line share trading facility, phone banking and cash management services among others.

5. Corporation Bank informed the Bombay Stock Exchange on Tuesday that its total business had crossed Rs 83,000 crore in the ongoing financial year, growing at 22 per cent on year. The bank’s total deposit grew 24% to over 490 bln rupees and total credit grew 20 per cent to over Rs 34,000 crore.

6. Public sector Indian Bank is set to provide more thrust to meet financial requirements of the urban poor formed as Self Help Groups (SHGs) with the opening of three more ?Microsate' (a satellite.

7. The New Year is likely to bring in good news for borrowers as interest rates on home and consumer loans could decline from the second quarter onward, but high fuel and food prices might play spoilsport by putting pressure on inflation, bankers and economists feel. Experts feel that interest rates have peaked and with deposit rates on the decline, consumers could see softening of interest rates in 2008 as the prudent stance of the Reserve Bank of India for almost the whole of last year managed to keep inflation low without disrupting economic growth.

8. Banks want their investments in company shares and debentures, loans and guarantees given to corporates as part of normal business activities, to be excluded from transfer pricing norms.

9. Reliance Banking Fund, an open-ended scheme from Reliance Mutual, topped the returns chart in 2007 in the banking funds' category, posting nearly 77 per cent returns.

10. Property transactions in India will soon have an insurance cover to fall back in case something goes wrong in the deal. The country’s two large private sector insurers, ICICI Lombard General Insurance and Bajaj Allianz General, are planning to launch title insurance covers this year. Title insurance is a cover that protects a potential owner of a property against loss from defects in title. The policy is a retrospective one, where the insured is protected against losses arising from the events that occurred prior to the date of issuing the policy. Globally, the policy is bought by investors, occupiers and financiers. At present, none of the property transactions, be it large acquisitions or a simple sale of a land or a flat, is covered through an insurance policy by an Indian insurer.

Tides of 3.01.2008

1. Corporation Bank will be opening 100 new branches in the calendar year 2008 with focus on western and northern regions of the country.

2. In a bid to stimulate credit offtake in the peak seasons, banks are preparing to offer discounts to their respective benchmark prime lending rates (BPLR).Currently, only highly rated corporates are raising bank funds at discounts to the BPLR, that currently ranges 12.75 per cent to 13.5 per cent. The discounts, even for these corporates, are barely about 100 basis points. Yet despite the discounts, the average cost of borrowings was close to 11 per cent.

3. State Bank of India has entered into an alliance with India Post in Kerala for making available some of its services to the public in financial inclusion.

4. Weekends are the time to relax for most officials. But not for a couple of officials in Bank of Maharashtra and for farmers in Amaravati and Yavatmal districts. It is the time for them to discuss issues related to better agriculture practices where experts provide technical inputs on various aspects. In its endeavour to provide counselling to the farmers in Vidharbha region (which grabbed headlines for farmers’ suicides), Bank of Maharashtra thought of going beyond extending financial assistance to them, and it came out with an idea of providing technical inputs to farmers in the drought-affected Vidharbha region. The bank initiated the process of organising counselling programmes for farmers in Amaravati district of Maharashtra in May 2007.

Tides of 24.12.2007

1. Some people call it a ‘micro branch’, while some others call it ‘branchless banking’. Finally, it comes to the point of leveraging the power of IT (information technology) for implementing financial inclusion programme. With the vast number of rural populace yet to get banking facility and the potential it provides for bankers, ‘branchless banking’ is all set to become the next killer product in the industry. Pilot projects by some banks, in association with technology partners, have proved that new generation technology tools and the dedicated human resource base will make branchless banking a gold mine for bankers in the years to come.

2. Old private sector banks are vulnerable to forces both within and from outside and it is time for them to focus on improving the work culture to face the threat from these forces, according to Mr Anantakrishna, Chairman and Chief Executive Officer of Karnataka Bank Ltd. Speaking at the inauguration of the 15th conference of the Karnataka Bank Officers’ Organisation (KBOO) in Mangalore on Sunday, he said that old legacy culture is the force affecting the old private banks from inside and ‘vulture’ is the force from outside.

3. Bonds softened last week in thin trading as credit offtake slowed down ahead of a long holiday season. Traders said that volatility in the foreign exchange market had little impact on bonds, as domestic factors overwhelmed exit by foreign institutional investors. In fact during the week, there was hardly any RBI intervention. The only intervention was to pump in liquidity through reverse repurchases. Net outflow on account of selling by foreign institutional investors was $907 million last week. This has prompted exporters and some potential foreign direct investors to take cover. As a result, one-month forward premia dropped below one per cent to 0.61 per cent last week. The previous week it was 1.75 per cent. Forward premia for three, six and 12-month also narrowed to 1.01 (1.73), 1.42 (1.88) and 1.11(1.40) per cent respectively.

4. Some of the public sector banks that have largely been sellers of bad loans are now considering buying such assets, sensing the business potential this market can offer.
A senior official from State Bank of India said that the bank has, in principle, decided to purchase assets and could start the process by April next year. “We have agreed in principle to start aggregating debt. We could either invest in them or try to sell to other asset reconstruction companies.

5. After steadily increasing for the past couple of months and surging by an all-time high of $11.871 billion during the week ended September 28, the country’s forex reserves fell by $599 million to $272.954 billion for the week ended December 14, 2007. The reserves increased by $33 million to $273.553 billion for the week ended December 7.

6. The World Bank approved $225 million loan/credit to Bihar to support the State in implementation of critical structural reforms to attain sustainable and inclusive development besides improving the delivery of services.

7. In a bid to give a further boost to infrastructure financing, the Finance Ministry has now allowed India Infrastructure Finance Company Ltd (IIFCL) to receive certain interest payments without them being subjected to tax deduction at source (TDS). The TDS exemption would be available only on interest payments other than ‘interest on securities’. It would basically be available on IIFCL’s loans and inter-corporate deposits.

8. The demand for commercial papers (CPs) is on the rise with mutual funds investing more in such short-term instruments. The total amount of outstanding CPs issued by companies rose by about 80 per cent to Rs 42,183 crore on October 31, 2007, against Rs 23,521 crore during the same time last year. “There is a latent demand from mutual funds for commercial papers and certificate of deposits as these are typically short-term instruments and they fit the overall maturity profile. The demand for CPs, however, falter when the mutual funds are hard pressed for cash particularly during the time of advanced tax outflows or tight liquidity conditions in the market.

9. The Reserve Bank of India is now rooting for environment conservation and fair social practices. In a circular issued today, the central bank has asked banks to put in place a suitable and appropriate plan of action towards helping the cause of ‘sustainable development’, with the approval of their boards. Spurred on by the worldwide momentum in sustainable development and the initiative being taken on various fronts by different organisations, including all major banks globally, Indian banks have been encouraged to actively look at corporate social responsibility, sustainable development and non-financial reporting.

10. Central Bank of India has launched a bouquet of products and services to cater to the needs of diverse strata of customers. Ms H.A. Daruwalla, Chairperson and Managing Director, Central Bank of India said that the new range of products and services would make Internet banking a reality. This would enable the bank to introduce a host of services and facilities like online booking of railway tickets and payment of utility bills, said a press release from the bank.

Tides of 20.12.2007

1. Financing costly professional courses is set to become cheaper for students from modest middle class homes. A Rs 4,000-crore plan is in the works that will enable the government to take over the interest burden on education loans during the 'moratorium period' — the time when students are pursuing academics and have not yet begun earning. As things stand, education loans come with a clause that allows students not to pay interest during their academic life. The interest for this period is added to the principal and payments begin once the student starts working. But now, according to a mega scheme being finalised by the Planning Commission, the Prime Minister's Office and the ministry for human resource development, the government will take over the interest burden for the moratorium period — estimated at around Rs 650 crore a year, assuming that five lakh students from families earning Rs 2.5 lakh a year or less avail of the loans. To qualify for the scheme, the student's household income must not exceed Rs 2.5 lakh per annum. The scheme will be open for professional and technical courses at the undergraduate or postgraduate levels.
2. The move for a Rs 4,000 crore plan to enable the government to take over the interest burden on education loans during the "moratorium period" — the time when students are pursuing academics and have not yet begun earning, is aimed not just to check brain drain from the country but also ensure that the government taps talented students who cannot otherwise afford professional studies because of high fees. According to government estimates, there are approximately 50 lakh students in professional courses of which about 5 lakh students come from families within the income range of Rs 2.5 lakh per year. In recent years, a large number of students, especially those pursuing MBA courses in India or going abroad for higher studies, have borrowed from banks. According to latest RBI data, there was a 51% rise in education loans, from Rs 9,962 crore at the end of March 2006 to over Rs 15,000 crore at the end of March this year. Tax sops too have played a role in accelerating loans and with the government allowing parents to avail of benefits, there could be a further spike in the coming year. Earlier, tax sops were available only if the student borrowed and paid the loan individually on completing his education.
3. As a first move towards making India the first country to adopt accounting standards on carbon emissions, the board of ICAI (The Institute of Chartered Accountants of India) has constituted a group which will come up with the draft guidelines before March 31, 2008. The group, set up on December 11, will be headed by ICAI accounting standards board chairman, Amarjit Chopra. When contacted, Chopra said the group will look into development of accounting and disclosure practices on emissions trading. The group will study the full scope and relevance of the carbon market from India’s point of view. ICAI president Sunil Talati said, the group will seek clarity on how corporates need to treat the income earned from carbon credits. "There is a view that carbon credits should be recognised for the purpose of accounting after they have been traded. The group is likely to seek views of corporates like SRF and Coal India."
4. The Indian carbon sector is getting hot. Venture capital firms are making a beeline to set up exclusive carbon funds for clean development projects (CDM) which have the potential to generate carbon credits. Kick-starting the process is IFCI Venture Capital Fund, which is planning to float Green India Venture Fund with a corpus of around euro 50 million, to begin with. The fund could be raised to euro 100 million once a partner is roped in. ‘‘We are currently looking out for a partner. We will raise the corpus of the fund, depending on the appetite for the carbon sector in India. One can size up the growth potential after the interest generated in greenhouse gas mitigation projects post-Bali,’’ said IFCI Venture Capital Fund managing director Ashok Kumar Choudhary. Green India Venture Fund is expected to be two-tiered, one for the domestic market and one, probably, for outside India. The fund will scout for viable CDM projects which could generate a good amount of carbon credits. Other financial institutions and banks are also said to be considering similar carbon funds, on the expectation that the carbon market will witness a huge upside in terms of valuations.

Tides of 19.12.2007

1. Muthoot Exchange Company which has obtained the Authorised Dealer Category II Licence from the RBI recently and plans to start its own money transfer operations. The company already undertakes close to six lakh money transfers valued at Rs 1,200 crore every year. Having obtained the Category II Licence enabling it not only to remit money from abroad to India but also f rom India to foreign countries. The transaction undertaken through the 400 branches of Muthoot Finance and other agencies such as hotels, resorts, travel operators and franchisees have enabled easy foreign exchange transactions to NRIs, students, tourists and business visitors.

2. The Prime Minister’s Council on Trade and Industry today discussed the adverse impact of rising rupee on exports and industry, besides the challenges of managing the surge in dollar inflows into the country. The Government was looking at measures to counter the impact of the rising rupee, particularly on labour-intensive sectors.

3. A Watson Wyatt study on India’s bancassurance sector has revealed that bancassurance would generate about 35 per cent of the private insurers’ premium income by 2008.
The study entitled ‘India Bancassurance Benchmarking Study 2006-07’, which Watson Wyatt claims to the first of its kind on the Indian market and part of an Asia-wide analysis has focused on bancassurance distribution.

4. Tata AIG Life Insurance Company Ltd (Tata AIG Life) has launched ‘United Child Solutions’ – a range of insurance offerings for the customers of United Bank of India. It is available in three variants.Educare 18 is a graduate plan, which gives the child lumpsum benefits at age 18 to provide for his graduation expenses. Educare 21 is a post-graduate plan, which gives the child lumpsum benefits at age 21 for his post-graduate expenses. Career Builder Plan provides a lump sum at 18, 21, 24 and 27 to take care of expenses at various critical milestones. In these three plans, a payer benefit rider can be attached to ensure the child’s policy continues in case of untimely death of the paying parent.

5. The odds were for a 25 bps cut, but, when the Federal Open Market Committee (FOMC), which sets the benchmark Fed Funds and discount rates, did just that, the stock market was very disappointed. The Dow Jones Industrial Average fell more than 200 points. The much-read and dissected post-meeting statement conceded inflation risk is diminishing and growth risk increasing. It repeated the mantra of future rate decisions being guided by incoming data.

6. Mr R. Seetharaman, CEO, Doha Bank, and Chairman, Doha Brokerage & Financial Services (DBFS) Ltd, has won an American award for his contribution to promoting US-Qatari trade and financial ties.

7. The Finance Ministry has relaxed encashment norms for joint holder type term deposits under the tax-saving ‘bank term deposit scheme’ framed last year. This scheme was developed to encourage flow of long-term deposits into the banking system.In the event of the death of the first holder, the Central Board of Direct Taxes (CBDT) has now allowed the joint holder to encash the term deposit before its maturity. Hitherto, the scheme did not permit any encashment of term deposits before the expiry of five years.

8. I-flex® solutions has forayed into the private banking and wealth management space with the launch of FLEXCUBE® Private Banking Suite. The FLEXCUBE Private Banking Suite provides financial institutions and their customers a unified view of customer wealth across their portfolios, including the ability to consolidate the holdings of a family. “The FLEXCUBE Private Banking Suite empowers institutions to shift their approach from a “one size fits all” to a personalised model. It will also help them reduce costs by giving them the ability to retire standalone wealth management solutions.

9. The Reserve Bank of India has detected and plugged a loophole in FEMA (Foreign Exchange Management Act) regulations which some Indian companies were exploiting to raise funds abroad and bring to India.The regulations are related to repayment of advances that are paid by overseas investors to Indian companies for allotment of shares under automatic FDI route. Under these regulations, while Indian companies are allowed to receive advance payment from NRIs and overseas investors, no time limit was stipulated for issue of shares or refund of the amount.

Tides of 14.12.2007

1. There has been a 63 per cent increase in external commercial borrowings made by Indian companies during the first seven months of this fiscal. About 384 companies have borrowed about $19 billion during the seven months ended October 2007, according to information released by the Reserve Bank of India.During the whole of the last fiscal, about 921 companies borrowed money worth about $25 billion abroad. This year the heavy borrowing comes despite steps taken by the Reserve Bank of India to limit access to external commercial borrowings to certain sectors and also tighten it generally by imposing a cap on the interest rates that can be paid on such borrowings.

2. The forex reserves increased by $33 million to $273.553 billion for the week ended December 7, due to currency revaluation. Compared to the earlier weeks the increase in this week is slightly subdued. The reserves went up $1.239 billion to $273.520 billion for the week ended November 30. In the week prior to that as well, forex reserves had increased by over $1 billion.

3. International ratings agency, Fitch Ratings, today upgraded Axis Bank’s National Long-term rating to ‘AAA (ind)’ from ‘AA+(ind)’. Fitch has also upgraded the bank’s individual rating to ‘C’ from ‘C/D’ and Support rating to ‘3’ from ‘4’. The ratings of debt programmes have also been upgraded.

4. Bank loans to equity-oriented mutual funds will now form part of the bank’s total capital market exposure, said the Reserve Bank of India in a note issued today.
In its note the RBI said, “Banks are advised to be judicious in extending finance to mutual funds and grant loans and advances to mutual funds only to meet their temporary liquidity needs for the purpose of repurchase/redemption of units.”

6. CITI BANK-The bank generated in 2001-02 business worth Rs 15.7 crore per employee. But the bank has been able to generate only Rs 13.6 crore in fiscal 2006-07, down roughly 13 per cent. On the parameter of profit per employee, another key element, the figure for the latest year stands at Rs 17.33 lakh as against Rs 22.14 lakh, its best in 2001-02.

7. As many as three consortia have submitted their financial bids for buying 26 per cent stake in the country’s oldest financial institution, IFCI Ltd. The last date for submission of financial bids was December 14.

8. Asian Development Bank (ADB) would provide India with up to $500 million in loans designed to promote public-private partnerships (PPP) between the Government and the private sector in order to ramp up investments in infrastructure.The funds would be provided to government-owned India Infrastructure Finance Company Ltd (IIFCL) in multiple tranches over the next four years. It is estimated that the money would help catalyse private sector investments in infrastructure of up to $3.5 billion.IIFCL would provide funds at commercial terms with over 20-year maturity for infrastructure projects, which is not being currently provided by the market.

9. Calyon Bank, Mumbai, belonging to the Credit Agricole Group of France, has signed a `White Label' agreement with Karnataka Bank Ltd, to provide risk management services. This agreement will enable the bank to provide hedging products like derivatives to its customers.

10. Corporation Bank will now offer a ‘financial health check-up’ for its customers. The bank is offering this service at two of its centres, Mumbai and Bangalore. Customers can get their finance portfolio examined, find out if it is a healthy mix and get advice on making investments.
The bank plans to introduce this service at all its other important centres.

11. UTI Mutual Fund and SBI Mutual Fund have been given the mandate to manage the funds mobilised under the life insurance services provided through the post offices network.
Such services are currently administered by the Postal Department under the banner of Postal Life Insurance (PLI) and Rural Postal Life Insurance (RPLI) schemes.

12. Small Industries Development Bank of India (SIDBI) would within the next two months approach the Reserve Bank of India for approval to set up an asset reconstruction company (ARC) targeted at the small and medium enterprises (SME) sector. It is in talks with many public sector banks including Punjab National Bank, Canara Bank, United Bank of India to set up an ARC for the non-performing loans in the SME sector.

13. Vijaya Bank plans to raise Rs 500 crore this year through issue of the perpetual bond issues. It is raising the resources to strengthen the tier-one capital. Perpetual bond issues are treated as tier-one capital under the Reserve Bank of India guidelines. Vijaya Bank’s move to tap perpetual bonds was partly due to the fact that it has little room to raise equity resources. This was because current regulations allow government equity in public sector banks at a minimum of 51 per cent. Government stake in Vijaya Bank’s paid-up equity of Rs 433.52 crore is currently 53.87 per cent.

Tides of 5.12.2007

1. Reliance Money has announced a distribution tie-up with Kerala-based Muthoot Group, a non banking finance company, for retailing its pure gold coins.
2. There is huge uncertainty on the growth prospects of Indian IT industry over the next four to five years if the rupee appreciation goes unabated, according to Mr Kiran Karnik, President, Nasscom.
3. Premature liberalisation of money and bond markets can lead to large and volatile capital inflows, intensifying complications for macroeconomic and monetary management, said Dr Rakesh Mohan, Deputy Governor, Reserve Bank of India.
4. Private sector projects in India supported by the International Finance Corporation (IFC) have a ‘high development outcome ratings’ than in China. The success rate in India — per cent of tracked companies with successful development results ratings — was 72 per cent compared with 43 per cent in China.
5. Centurion Bank of Punjab has launched ‘Post Box Service’ in the two countries for NRI customers who can use the service to send documents, statement and cheque requisition, account instructions, electronic banking application form, mandate application form, change of address form, PIN re-generation, debit card re-issue or any other account operating instructions including FD opening or renewal instruction.
6. Karur Vysya Bank (KVB) has tied up with IDBI Capital Market Services Ltd to provide online trading facility on both BSE and NSE for its demat account holders. These transactions could be put through idbipaisabuilder.in of IDBI Capital and the service would be available from March 1, 2008.
7. The Securities and Exchange Board of India has relaxed guidelines for issue of corporate bonds through the public issue route. The new norms permit companies to come out with bonds with below investment grade popularly known as “junk” bonds. A SEBI circular issued today said that for developing a market for debt instruments, the regulator has decided to allow issuances of bonds below investment grade to suit the risk as well as returns appetite of investors.SEBI has reasoned that as of now corporates were not allowed to issue bonds below investment grade, but in a disclosure-based regime, it should be left to the investor.
8. It is obvious that Indian policymakers can do little about containing the magnitude of the liquidity squeeze that has been the by-product of the sub-prime saga in the US. The RBI will have to factor in this reduced availability of external credit in its plans, if any, to tighten the credit delivery system.
9. The forex reserves went up by $1.133 billion to $272.281 billion for the week ended November 23 following constant intervention by the Reserve Bank of India in the market.
10. Banks may no longer be able to resort to strong-arm techniques for loan recovery. The draft guidelines issued by the Reserve Bank of India suggest that banks should use the forum of Lok Adalat for the recovery of personal loans, credit card loans or housing loans of less than Rs 10 lakh. Recently, some banks have been in the spotlight for alleged harassment of their customers by recovery agents.

Tides of 30.11.2007

1. Indian workers in other countries will soon be able to send money, less than $100, to their family back home using a mobile phone. Bharti Airtel and Western Union have decided to jointly develop and pilot a mobile money transfer service in the country. The move is part of a global initiative by the GSM Association wherein 35 mobile operators spread across 100 countries have taken a commitment to enable the world’s 200 million international migrant workers to easily and securely send remittances to their dependents.

2. Short-term hedging, particularly those ranging from 12 months to within three years, are the most frequently used by corporates and there are hardly any takers for the long-term hedging contracts in India, as per a survey report.

3. The Insurance Regulatory and Development Authority (IRDA) plans to soon come out with separate guidelines for health insurance players, aimed at comprehensive medical insurance coverage and redressal of consumer grievances.“To handle a plethora of issues relating to health insurance with focussed attention, a separate health unit has been set up in the Authority; specialised resources have been inducted to strengthen the role of IRDA in the development and better conduct of health insurance business,” Mr C.S. Rao, Chairman of IRDA, said at a conference organised by FICCI.

4. Faced with a deteriorating US dollar, public sector banks (PSB) are beginning to reduce their cash and cash equivalent balances with the American banks and shifting to the Euro.

5. Mr K.V. Kamath, Chief Executive Officer of ICICI Bank, has been named the Businessman of the Year 2007 by Forbes Asia magazine. The 60-year-old is the third Indian in four years after Mr Nandan Nilekani of Infosys.

6. Reliance Industries Ltd plans to investment Rs 17,000 crore in oil and gas exploration over the next few years.

7. Credit Analysis & Research Limited (CARE) and United Bank of India have signed a MoU for facilitating Bank Facility Ratings to borrowers of United Bank of India from CARE for the purpose of Basel.

8. ICICI Bank is talking to the West Bengal government to involve with the University of Calcutta for starting a banking and insurance course.

9. Bank of India (BoI), along with its partners Union Bank of India and Dai-Ichi Insurance, is likely to infuse around Rs 500 crore in the next 6-7 years in a proposed life insurance joint venture.

10. The Foreign Exchange Services (FES) division of Centurion Bank of Punjab Limited (CBoP) is contemplating forging tie ups with travel companies like Kuoni Travel Group and Cox & Kings for launching various travel products. Aimed at offering convenience in payments and credit to travellers, the FES division plans to launch a slew of products including holiday loans and travel-oriented cards. The move is aimed at cashing in on the growing outbound tourism market in India. The number of Indians travelling abroad is set to reach 50 million by 2010.

Tides of 24.11.2007

1. Import power plants, facilitate corporate borrowings, reduce dollar liabilities, and don’t squander away foreign exchange (forex) reserves. These are among the suggestions that Mr N. A. Mujumdar makes in a recent book titled ‘Inclusive Growth: Development Perspectives in Indian Economy’ ( www.academicfoundation.com).

2. The country’s forex reserves increased by $967 million for the week to touch $271.148 billion for the week ended November 16, as per figures released by the RBI. The forex reserves had increased by $3.663 billion to touch $270.181 billion in the previous week. Forex reserves have been rising for over two months now. The buying of dollars by the RBI to keep the rupee from appreciating suddenly has also helped augment the forex kitty.

3. ICRA Ltd and the city-headquartered United Bank of India have signed a memorandum of understanding to rate the bank’s loans and its other exposures under the standardised approach of RBI’s new capital adequacy framework for Basel-II. According to statement by the company, its ratings for the standardised approach would be carried out under its ‘Line of Credit” rating service, and would enable UBI to assess the new risk weights applicable to its borr owers under Basel-II. The risk weights would be linked to the various rating categories and would be as per RBI’s relevant guidelines. ICRA will assist borrowers of the bank to obtain ratings and offer special terms to the clients of the banks covered by the MoU. An ICRA rating for the bank’s client will enable faster loan processing and competitive credit terms from the bank.

4. The merger of Centurion Bank of Punjab (CBP) with the Kerala-based Lord Krishna Bank (LKB) would be completed by March next.

5. Effective management, optimal use of capital, and implementation of sound human resource practices are the key challenges facing the Indian banking industry, according to Mr. H N Sinor, Chief Executive, Indian Banks’ Association (IBA). These must be addressed in order to prepare Indian banking for adopting global best practices. “Managing capital risk is particularly important in order to maximise returns,” said Mr Sinor, in the context of two-day Bankers’ Conference (BANCON) in Mumbai, starting November 26.

6. The Life Insurance Corporation of India has formed a separate company called “LIC Pension Fund Ltd” to manage pension funds. This is the first company incorporated in India to manage pension funds under the New Pension System (NPS).

7. Banks may have access to a new means of loan recovery if the recommendations of a working group appointed by the Indian Banks’ Association are accepted by the Reserve Bank of India and the Government.The IBA’s suggestions include setting up of fast track courts on the lines of a ‘Lok Adalat’ to facilitate the speedy recovery of loans and repossession of property within the existing legal framework.“What is missing in our country is the presence of some special courts, which can deal with such cases expeditiously. There is a need to create such infrastructure so that there is some legal recourse for such problems,” said Mr H. N. Sinor, Chief Executive, Indian Banks’ Association.The working group will submit its recommendations in the next 15 days.

8. Dhanalakshmi Bank Ltd is contemplating the rights issue route to enhance its capital base.

9. ICICI Bank has joined hands with Johnson & Johnson, world’s largest healthcare product manufacturer and had offered a free blood glucose monitoring test for its customers at Vadakara branch.

10. Indian corporates have raised around $11.9 billion through overseas borrowing in the first five months of 2007-08, according to the Reserve Bank of India (RBI) data on external commercial borrowings.

Tides of 21.11.2007

1. The global economic and financial environment continues to deteriorate. The (sub?) prime concern is the US. A new study estimates credit will contract $2 trillion as financial institutions repair balance sheets. That puts a lot of new lending on hold, which means less spending (the American economy is credit-driven, if not anything else) and considerably increases the odds of a recession.
2. State Bank of India has tied up with its wholly owned subsidiary SBICAP Securities Ltd for providing e-trading services to its customers, the bank said in a notice to the BSE today. SBI already provides online trading through ‘eZ-trade@sbi, in a tie-up with Motilal Oswal Securities Ltd. It is a three-in-one account where the demat account and the savings or current account is with SBI and the trading account is with Motilal Oswal.
3. ICICI Prudential AMC has entered into a strategic partnership with Central Bank of India for distribution of its mutual fund schemes to further strengthen its distribution reach. Central Bank of India will now be distributing ICICI Prudential Mutual Fund products to its customers across India. This alliance between ICICI Prudential AMC and Central Bank of India will be a step further towards reaching retail investors and providing them with investment solutions to facilitate their inclusive growth in the process of wealth creation.
4. Syndicate Bank has launched an online loan application facility that does away with the branch as an intermediary for generating loan queries. The bank has launched this facility for housing loans, educational loans, Rs 10 lakh and above loans for SME sector and Rs 2 lakh and above loans for self-employed, professionals and traders.
5. State Bank of India Staff Association (SBISA) will oppose the merger of associate banks with State Bank of India, despite having agreed to the merger of Bank of Saurashtra with the parent bank.
6. The US economy may fall into a recession if the Fed takes counter-measures, such as tightening credit.
7. The Indian banking sector is undergoing rapid transformation and is expected to change and evolve considerably in the near future.Mainly two factors are driving these changes. One, Indian banks are gearing up to face the post-2009 challenges, when they will be exposed to increased foreign competition. From April 2009, foreign banks will be allowed to own up to 74 per cent stake in Indian private banks. The foreign banks with large capital, advanced technology, best international practices and skilled personnel are expected to pose competitive challenges to Indian banks. Two, several Indian banks are expanding overseas as Indian companies are going global and India is attracting more foreign capital. Banks have to match their services to global standards.
8. The Hinduja Group is planning to enter the financial services space in India with a bang. Apart from plans to set up life insurance, non-life insurance and asset management companies, the group is also working towards areas such as wealth management, broking and portfolio management services. The group has finalised its partners for setting up a holding company, which will have three business arms offering wealth management, broking and portfolio management services. In a three-way agreement, IndusInd Bank along with AMAS Bank (a private banking entity owned by Hinduja Group in Switzerland) will own 51 per cent stake while the foreign partner will own the remaining 49 per cent in the holding company. IndusInd Bank officials, however, refused to disclose the name of the foreign partner.
9. Life Insurance Corporation of India (LIC) is in another legal soup, this time on overcharging of fees for assignment of insurance policies. LIC is already facing two legal suits over not allowing assignments for trading and lending in ealrier insurance policies. The petitioner in the present case is Dravia Finance, an NBFC owned by Ketan B Mehta, the person who won both the ealrier cases in the Bombay High Court against LIC over the same issue. Assignment or transfer is a method by which a policyholder can transfer his rights and benefits in the life insurance policy to another entity. The assignee entity can be a family member, relative, friend, a lending institution like a bank or a non-banking finance company (NBFC). The case has been filed in the Bombay High Court on grounds that Section 38 of the Insurance Act does not permit any insurer to exceed a fee of Re 1 for an assignment.
10. Indian Bank is gearing up to further its financial inclusion initiatives and increase penetration into rural areas. The public sector bank, the first one to implement a financial inclusion project (which involves instilling the banking habit among the lesser privileged of urban and rural India), expects to open five lakh “no-frills accounts” to encourage rural savings and business ventures by the end of this financial year. It has already opened over 4.5 lakh such accounts.

Tides of 17.11.2007

1. Corporation Bank on Friday launched two maiden services for its customers — ‘Financial Health Check-Up’ and ‘Invest Shoppe’ — in Mangalore. While the financial health check-up service facilitates the customer to get his/her finance portfolio examined from the point of having a healthy mix and to get advice on risk-reward portfolio sharing, Invest Shoppe provides a host of financial services such as investments in share market, sale of mutual funds and gold coins and tax collection under one roof.

2. Inflation is the result of synchronised currency debasement by central bankers the world over. The markets understand this better and have been sending the right message through rising gold prices, particularly during the last few years. The RBI woul d do well to read the signals and take appropriate measures, says SHANMUGANATHAN in Business line.

3. The country’s forex kitty swelled by $3.663 billion to $270.181 billion for the week ended November 9. The reserves had increased by $4.068 billion to touch $266.518 billion for the week ended November 2, 2007.

4. Resident Indians may soon have a new instrument to hedge themselves against exchange rate fluctuations. A panel appointed by the Reserve Bank of India has recommended trading in currency futures on dedicated exchanges.A currency future is an exchange-traded derivative that allows investors to sell or buy a currency at a fixed price on a future date. To begin with, futures trading would be allowed only in rupee-dollar contracts. The Indian rupee has appreciated by around 11 per cent against the dollar this calendar year.

5. United Bank of India proposes to shortly launch online trading of shares and cash management services as part of its efforts to boost non-interest income. It has achieved more than 65 per cent growth in non-interest income in the first half and it wants to continue with it in the second half also, particularly when the net interest margin is under pressure.

6. Central Bank of India is poised to regain its position and market share among the public sector banks (PSBs) as at the time of nationalisation. Currently in 7th place, the bank is working to secure a market share of 4.25 percent by the end of this fiscal.

7. Public sector banks saw a slowing down of profits in the second quarter. Profit growth was at about 23 per cent compared to over 47 per cent in the first quarter. And a few banks faced difficulty in this quarter with profits actually dipping compared to last year. State Bank of Bikaner and Jaipur was one of them.

8. The Finance Minister, Mr P. Chidambaram, met exporters from the textiles, clothing and handicrafts sectors on Thursday, who have been hit by the strengthening rupee and hardening interest rates over the last several months. The meeting was also attended by chiefs of a number of public sector banks and institutions.According to industry players, the Minister assured them that the Government would work out “concrete measures” to help them tide over the crisis. The Export Promotion Council for Handicrafts Executive Director, Mr Rakesh Kumar, told presspersons after the meeting that the Minister was “very positive” and had assured them that the Government would come out with steps to help the exporting community.

9. The Reserve Bank of India has launched a financial education Web site.
The Web site is aimed at teaching the basics of banking, finance and central banking to children of different age groups. It will soon also have information that would be useful to other target groups such as women, rural and urban poor, defence personnel and senior citizens.

10. IndusInd Bank today signed up with Cholamandalam MS General Insurance Company to sell the insurer’s products through its branches.

Tides of 11.11.2007

1. Canada’s largest public pension fund, Caisse de Depot et Placement du Quebec (CDPQ), is eyeing investments in the booming Indian real estate sector, with plans to invest up to $1.7 billion (US dollars) over the next five years.

2. The forex reserves increased by $4.068 billion to touch $266.518 billion for the week ended November 2, 2007, according to the Reserve Bank of India’s Weekly Statistical Supplement.

3. The excess supply of funds is expected to continue, despite the recent measures announced by the Reserve Bank of India to mop up the surplus, say analysts and bank treasury managers, even after the 50 basis points hike in cash reserve ratio.

4. Public sector entities are expected to swamp the domestic financial markets with bonds worth Rs 9,000 crore over the next four months.Public sector banks (PSBs) alone are expected to raise Rs 5,500 crore during the period. Banks in the fray to raise resources through bonds include Bank of India, State Bank of India, Union Bank of India, Vijaya Bank, UCO Bank and Dena Bank. In addition, transmission utility, PowerGrid Corporation of India Ltd, is expected to raise Rs 3,300 crore during the current financial year. Banks are raising the resources to beef up their respective Tier II capital, for propelling their asset growth and partly for offsetting the impact on capital standards after migrating to Basel II next financial year.

5.LIC Housing Finance may look at the possibility of issuing equity shares through preferential allotment to promoters or investors. This is in addition to the option of issuing equity shares on Qualified Institutional Placement basis.

6. The Reserve Bank of India has further relaxed the remittance limit to $300,000 from $100,000 to importers of rough diamonds provided import bills and documents are directly procured from overseas suppliers.

7. The Government has elevated seven General Managers from various public sector banks to the post of Executive directors, filling up top level vacancies in certain banks.

8. The Reserve Bank of India has constituted an Internal Working Group under the Chairmanship of Mr V.S. Das, Executive Director, Reserve Bank of India, in order to examine the recommendations of the Radhakrishna Expert Group on Agricultural Indebtedness. The report submitted by the committee addresses issues relating to creation of credit absorption capacities, need for risk mitigation practices, introduction of cyclical credit system, dispute resolution mechanisms and setting up of a debt redemption fund.

9. Appreciation of rupee against the dollar has thrown a new M&A opportunity for India Inc, which wants to reach out to the world by acquiring concerns on a global scale, according to the industry chamber, Assocham.

10. The Reserve Bank of India has advised banks to ensure that promoters of projects bring in their equity capital before the debt is advanced. RBI has also asked banks also to ensure that the stipulated debt equity ratio is maintained throughout the life of the debt.
In a circular to banks, the central bank said normally, the promoters either bring their entire contribution upfront before the bank starts disbursing its commitment, or they bring certain percentage of their equity (40–50 per cent) upfront while the balance is brought in stages.

Tides of 3.11.2007

1. Forex reserves were up by $1.307 billion to touch $262.450 billion, for the week ended October 26, according to figures released by the Reserve Bank of India. The rise was mainly on account of currency revaluation. The gain was lower than the previous week’s rise of $4.457 billion, when the forex reserves touched $ 261.143 billion. Forex reserves have been rising for over two months now. It has also been aided by the Reserve Bank of India buying dollars to keep the rupee from appreciating.

2. Corporate India may be reporting good profit numbers. But lending money didn’t make much for public sector banks as a group in the second quarter ended September 30. Their net interest income (or interest earned less interest expense) did not grow at all in this quarter. Yet profits grew 23 per cent for a set of 21 public sector banks for which the figures are available.It was liquidation of some of their equity investments, cashing in on the stock market boom, some recoveries of old bad debts, some treasury gains from the bond and forex markets and some other non-interest income that rescued public sector banks this quarter. Other income grew 45 per cent for these banks contributing almost the entire profits for this quarter.

3. Dhanalakshmi Bank has posted a net profit of Rs 13.50 crore during the half year ended September 30 as compared to Rs 7.02 crore for the previous corresponding period, registering a growth of 92.31 per cent. The operating profit increased from Rs 16.65 crore to Rs 25.04 crore. The total income increased from Rs128.08 crore to Rs170.73 crore. The total deposits increased from Rs 2,643 crore to Rs 3,247 crore , while total advances moved up from Rs 1,776 crore to Rs 1,978 crore .

4. Birla Sun Life Insurance has registered 94 per cent growth in new business premium at Rs 585 crore in the first six months of the current fiscal.The company would grow faster than the life insurance industry this fiscal. It hopes to end the year with a growth of 150-170 per cent in new business premium. The industry is expected to end the fiscal with a growth rate of 50-60 per cent.

5. For the first time, the market share of Life Insurance Corporation of India, the first year premium income fell below 50 per cent in September to 49 per cent, compared with 79.6 per cent a year ago, and 74.5 per cent in August, according to the data compiled by Insurance Regulatory and Development Authority. The sharp fall in market share was on account of a 47.4 per cent year-on-year decline in LIC’s first year premium income to Rs 2,555 crore in September.

6. The World Bank has signed three loan agreements with India for total assistance of $944 million towards three projects in the critical areas of rural finance, vocational training and restoration of water bodies.The loan agreements are for strengthening of rural credit cooperatives involving a loan assistance of $600 million, vocational education training project with assistance of $280 million and additional financing for the Karnataka Community-based Tank Management project involving $64 million loan and credit.

7. To tap the transport and energy financing market, German bank NORD/LB plans to set up an office in India shortly. The representative office, to come up in Mumbai, is expected to commence operations in January 2008.

8. Central Bank of India plans to launch the reverse mortgage scheme for the senior citizens. “We are ready to launch the product soon, but we are just waiting for the taxation issues to get resolved,” said Ms H. A. Daruwalla, its Chairperson and Managing Director.Reverse mortgage is a stream of loan payments against the homeowner’s net equity stake in the property. In this scheme, the lending institution gives the borrower a fixed sum of money on monthly basis. The borrower can also choose to take a lump sum payment.

9. Karur Vysya Bank has introduced yet another variant of its multi-city current account product – KVB Economy.The other variants include KVB Standard, KVB Classic, KVB Premium, KVB Gold and KVB Platinum. The major difference in opting for a particular variant of this product is in the maintenance of the minimum average balance. KVB Economy, according to a release, would require current account holders to maintain a minimum average balance of Rs 10,000.

10. Bank of Baroda is planning to raise about Rs 2,500-3,000 crore by January to meet capital requirements under Basel II norms and for further growth in business. The bank is yet to decide on whether the capital would be tier-I or tier- II.

Tides of 1.11.2007

1. The Extraordinary General Meeting (EGM) of shareholders of Karnataka Bank on Wednesday passed a unanimous resolution giving consent to the issue of 63.73 lakh equity shares of Rs 10 each on preferential basis.

2. Canara Bank rebalanced its credit portfolio and shifted focus to priority sector areas during the second quarter of the current financial year.
It has contained the growth of retail advances. Retail advances grew only 5.91 per cent on year-on-year basis to Rs 17,187 crore. Priority sector advances grew 25.08 per cent during the same period to Rs 38,920 crore.The portfolio moderation notwithstanding, the yield on advances improved to 10.23 per cent from 8.95 per cent. The improved yield was partly achieved through repricing of advances.

3. Bank of Baroda is planning to raise about Rs 2,500-3,000 crore by January to meet capital requirements under Basel II norms and for further growth in business. The bank is yet to decide on whether the capital would be tier-I or tier- II.

4. Backed by a growth in other income, Centurion Bank of Punjab has posted a 33.76 per cent in net profit at Rs 41.64 crore for the quarter ended September 30, 2007, against Rs 31.13 crore in the corresponding quarter of the previous year.

5. ICICI Bank Eurasia LLC, a subsidiary of ICICI Bank, has opened a branch in St Petersburg. The branch will offer a range of banking and financial services.This is the 5th branch that ICICI Bank has opened in Russia.

6. Standard Chartered Bank plans to ramp up its activities in the microfinance space in the coming months. It will increase its exposure as well as the number of microfinance institutions (MFI) partners. Microfinance is also a commercially attractive proposition. The aim is to increase the exposure from current level of close to Rs 100 crore to about Rs 500 crore by December 2008.

7. The economy continues to do well with GDP registering a growth of 9.3 per cent in the first quarter of this fiscal. Thoughthis is lower than the 9.6 per cent recorded in the same period last year.

8. The most significant announcement by the RBI Governor, Dr Y. V. Reddy, is the hiking of CRR by 50 basis points. The Bank rate, the repo rate and the reverse repo rate have thankfully been kept unchanged.

9. Karur Vysya Bank has registered a net profit of Rs 43.41 crore for the quarter ended September 2007 against Rs 42.56 crore during the corresponding quarter of the pervious fiscal.

10. Karnataka Bank Ltd has recorded a net profit of Rs 60.14 crore in the second quarter of the current financial year as against Rs 59.61 crore in the corresponding period of the previous year, registering a growth of 0.89 per cent.

TIDES OF 20.10.2007

1. The forex kitty swelled by $5.356 billion to $256.686 billion for the week ended October 12, backed by sustained intervention by the Reserve Bank of India in the forex market.The reserves had gone up by $3.568 billion.

2. ICICI Bank posted a net profit of Rs 1,002.6 crore for the quarter ended September 30, 2007, up 33 per cent from Rs 755.01 crore in the corresponding quarter last year on the back of a 33 per cent growth in advances.

3. As part of its efforts to penetrate the semi-urban and rural areas of Gujarat, SBI Life Insurance, a joint venture between State Bank of India and Cardif-A BNP Paribas Company, on Friday announced a strategic bancassurance tie-up with the Valsad District Co-operative Bank Ltd (VDCB).The tie-up is a referral arrangement wherein SBI Life products will be available throughout all the 43 branches of VDCB.

4. Bank of Rajasthan, with a pre-dominantly North Indian focus, seeks to increase its presence in the Southern States with at least 10 new branches this fiscal.

5. Andhra Bank has reduced interest rates on housing, personal, vehicle loans and on advances to transport and agricultural sector during the festival season.

6. State Bank of Mysore (SBM) intends to raise Tier II capital through bond issues of up to Rs 400 crore during the year to support its asset growth. In addition, the bank is also planning a follow-on public issue.

7. The board of directors of ICICI Bank has approved the establishment of ICICI Foundation for inclusive growth, subject to the required approvals. The Foundation would integrate, consolidate and scale up the group’s existing initiatives in the area of philanthropy and development.

8. UCO Bank has announced festival discount on its home loans under UCO Shelter. For all new housing loans up to Rs 20 lakh, the bank will charge with immediate effect 0.25 per cent less than the normal rates.

9. HSBC has launched an enhanced version of the ‘HSBC Premier’ service for its mass affluent customers.The new HSBC Premier offers cross-border banking services where customers can take their accounts, credit history and banking relationships with them wherever they choose to live and work- subject of course to local regulations. It also offers emergency encashment facilities across any Premier branch or centre, a single global emergency number which you can access anywhere in the world and swipe-based Internet Protocol phones which connects a customer to his home country call centre.Customers will also have special benefits on their HSBC Premier Master Card credit card.

10. Punjab & Sind Bank plans to soon raise a sum of Rs 1,000 crore through Certificate of Deposit, which is a debt instrument. ICRA has assigned A1+ rating .