Tides of 5.08.09

1. India will not go slow on financial sector reforms but its future response will take into account the impact of the global financial crisis.“There is speculation, apprehension that India may slow down on reforms. That is a mistake.“We will not slow down on reforms but will recalibrate our response to reflect lessons learnt from the crisis,” said the RBI Governor, Dr D. Subbarao, at a function here today.Economists said that the RBI Governor’s statement indicates that the opening up of the financial sector will depend on how the global and domestic scenario pans out and after the risks have been assessed.While implementing the financial sector reforms, the RBI will take into account the international developments, said Dr S. S. Tarapore, a former Deputy Governor of the RBI.
2. Trade and commerce on the Internet are suffering a slight hiccup now. The reason — cyber security for credit card payments just got a bit tighter since August 1. If you are among those who buy goods online, you’ll now have to do it after giving yourself an extra layer of protection — through the registration of a password with your bank.Typically, buying goods online involves giving details of your credit card including your name, your 16-digit credit card number, followed by a three-digit card verification value code (CVV) number given at the back of your credit card.Hitherto, you left yourself open to a possible fraudulent use of your card because both these numbers were visible on the card — and these could be noted down and (mis)used later. Now, that will not be possible.For the 25 million credit card holders in the country, the registered password offers an extra wall to secure their transactions without fear of someone misusing the card numbers.
3. Corporation Bank, in association with the UAE Exchange and Financial Services Ltd, has launched MoneyGram remittance service. According to a bank release, the facility has been launched at 300 branches in the first phase. Currently, Corporation Bank has a tie-up with 10 exchange houses in the Gulf for speed remittances and DD drawing. With the tie-up with MoneyGram, the NRIs can now send funds to India quickly, the release added.
4. Standard Chartered Bank’s Indian operations reported a 14 per cent rise in operating profit to $526 million, for the first half of 2009, from $460 million in the corresponding period last year.Income increased by 9 per cent to $904 million from $829 million last year.These income and profit figures are excluding the $146-million income the bank had from the sale of its asset management business last year.The share of Indian operations in the group’s profits, at 19 per cent, continued to be the second largest, after Hong Kong. Wholesale banking is the largest segment contributing over 90 per cent to the operating profit.
5. Bank unions have decided to go ahead with their two-day nationwide strike on August 6 and 7 after their bilateral talks with the Indian Banks’ Association (IBA) and the conciliatory talks under the aegis of the Chief Labour Commissioner failed on Tuesday.The talks failed after the IBA further pruned its wage increase offer to 13 per cent and also made it clear that it cannot offer the existing pension scheme to those public sector bank officers and employees who had in the mid-nineties opted for provident fund as their second retirement benefit, after gratuity.The United Forum of Bank Unions (UFBU), a representative body of nine unions, had urged the IBA to provide another option for about 3,00,000 employees to move from the provident fund scheme to the pension scheme.
6. Mr T.S. Narayanasami has been appointed Managing Director and CEO of United Stock Exchange, said a press release issued today.Prior to this Mr Narayanasami was Chairman and Managing Director of Bank of India and Chairman of Indian Banks’ Association. He has also been Chairman and Managing Director of Indian Overseas Bank and Andhra Bank, as well as Executive Director of Punjab National Bank.United Stock Exchange, an exchange for trading in financial derivatives, is promoted by 16 banks and financial institutions. These include both public sector and private sector institutions.
7. The civil aviation minister, Mr Praful Patel, on Tuesday said the government is planning to "corporatise" the state-run Airports Authority of India (AAI) and change it from an "authority" to a "company" that will be listed (on the stock exchange).Mr Patel said that this would be done by March 2010. He said that it would become easier for the AAI to arrange for funding for its modernisation projects, once it became a company.He said that an amendment would have to be made in the AAI Act for this.
8. British students completing their business and finance related courses are keen to gain work experience in companies based in India, according to the UK-India Business Council.Ten British students from various universities have begun their work experience with Indian companies on winning the UK-India Business Council (UKIBC) Scholarship Scheme 2009.
9. The Bank of America agreed to pay US regulators a $33-million fine for misleading its investors about billions of dollars in bonuses paid to Merrill Lynch executives when it acquired the investment bank.While seeking stockholder approval of the deal to acquire Merrill Lynch, the Bank of America said that Merrill would not pay year-end bonuses to its executives, the Securities and Exchange Commission said. But the bank had actually already reached a deal with Merrill Lynch that allowed it to pay $5.8 billion in bonuses.The SEC alleges that stockholders were misled when they were told no bonuses would be paid, while the companies had actually already agreed on a payment plan. This information must be disclosed under financial regulations.
10.An aggressive lending rate coupled with a high cost of deposits have seen the State Bank of India’s (SBI) retail business bleeding, probably for the first time ever, in the first quarter of this financial year.India’s largest public sector lender had announced a slew of home loans and auto loans at 8 per cent per annum while other banks still charged around 10 per cent.It had announced similar schemes for the SME sector to meet the needs of the SME units during the slowdown.“Retail is a resource intensive business and our term deposits portfolio has also grown at a higher rate. We should see this easing over the next couple of quarters as the cost of deposits goes down and that would ease the pressure on the retail operations too,” said a senior official at SBI.
11.Public sector Oriental Bank of Commerce (OBC) has launched on-line collection of central excise duty and service tax and has made the facility available in all branches.The new facility, launched by the bank's CMD Alok Misra on Saturday will be available in all branches of the bank with effect from August 1, a release said. "All customers having internet banking facility with the bank with transaction rights in any of the branches and are registered with Central Board of Excise and Customs by having an assessee number are eligible for making tax payment.
12.Delhi-based Punjab National Bank has registered a 62.4 per cent rise in net profit at Rs 832 crore in the April-June quarter of the current fiscal, compared with Rs 512 crore in the corresponding period of the previous fiscal. The increase in net profit is primarily due to various cost control measures, better administration and effective asset-liability management.The bank has already made a provision of Rs 150 crore towards wage revision.The bank’s net interest income (NII) surged 28.9 per cent to Rs 1,862 crore during the said quarter against Rs 1,445 crore in the same quarter last year.According to MV Tanksale, executive director, PNB, the banks posted the surge in profits despite “challenging market conditions”.Total income stood at Rs 6,178 crore during the April-June quarter, compared with Rs 4,595 crore in the corresponding period a year-ago. The bank’s advances for the fiscal year were likely to grow at 22.0 per cent, while net interest margins (NIM) could be at 3.5 per cent, Tanksale said.
The capital adequacy ratio of the bank was 14.5 per cent against 13.0 per cent at the end of June 2008.

Tides of 4.08.2009

1. Banks have begun derisking their investment portfolio. This is reflected in a sharp increase in medium and long-term yields.

Top bankers said that they were shifting their investment preference to short-term securities, including Treasury Bills. Currently, banks’ investment-deposit ratios are quite high — at over 30 per cent on a nominal basis and close to 90 per cent on an incremental basis. Banks are expected to invest only up to 24 per cent of their net demand and time liabilities in mandated SLR (statutory liquidity ratio) eligible Government securities.The diminished interest in long-term G-Secs is evident from the high spreads between one-year paper and 10-year paper. The spreads are currently about 245 basis points for five-year securities and 290 basis points (bps) for 10-year securities. The rising spreads, bank officials said, in turn implied that the Government would have to bear higher costs on its incremental borrowings for the rest of the year. This year, the Government’s revised gross borrowing target is Rs 4.51 lakh crore. Till last week, only about 44 per cent of the borrowing target has been met.

2.City Union Bank’s net profits for the first quarter of the current fiscal rose 20 per cent to Rs 31.55 crore. The growth in profits came on the back of a 24 per cent growth in interest income at Rs 228 crore. While advances grew 22 per cent to Rs 5,508 crore, deposits grew more robustly at 27 per cent to Rs 8,377 crore. A bank press release said that the net interest margin was at 2.36 per cent.

3. Two Deputy General Managers of Corporation Bank – Mr Kundapur Giridhar Shenoy and Mr B. Lakshmi Narayana – have been promoted as General Managers of the bank, says a bank release.
4. ICICI Lombard proposes to boost business from social sector schemes in view of the Union Government’s focus on financial inclusion.The company is targeting about 15 per cent of its revenue from government-sponsored insurance schemes for the poor in 2009-10, Mr Dilip Jashnani, Head, Financial Inclusion Group, ICICI Lombard, told Business Line. Last year, nearly 10 per cent of the company’s revenue of Rs 3,748 crore (calculated as gross written premiums) came from this segment.While the four public sector insurance companies continue to be the front-runners in the distribution of government-subsidised insurance schemes, private players are slowly catching up.
5.Interest rates may head up after December on the back of higher credit offtake, the Government's borrowing programme, infrastructure spending, and the consequent private participation, according to Mr Y. M. Deosthalee, Chief Financial Officer of Larsen & Toubro.Inflationary pressure, as a result of inflow of funds from overseas debt and equity investors, may also fuel an interest rate rise ."If inflows continue, there will be a pressure on the RBI to buy dollars. If that happens, they would have to release rupees, leading to inflationary pressure, resulting in interest rate increase. All indicators are towards an increase in interest rates," he said in an exclusive interview with Business Line.It may be noted that the RBI recently raised its Wholesale Price Index (WPI) forecast for end-March 2010 to five per cent from four per cent earlier, stating that global commodity prices have rebounded faster than the global economy.
6. Canara Bank has entered into a memorandum of understanding (MoU) with Crisil Ltd.The MoU envisages credit rating of the bank’s existing and prospective customers under micro, small and medium enterprise (MSME) sector for three years till March 31, 2012, or till the validity of the National Small Industries Corporation (NSIC) scheme.Under the MoU, the rating fee has been subsidised for small enterprises (including micro enterprises) registered with NSIC with a special discount to the bank’s clients.In respect of small enterprises not registered with NSIC and medium enterprises not eligible for the NSIC subsidy, the rating fee will be discounted.
7.The United Forum of Bank Unions (UFBU) may go on a follow-up indefinite strike if the Indian Banks’ Association (IBA) fails to expedite wage settlement talks, a senior office-bearer said.The apex body of nine trade unions has called for a strike on August 6 and 7.Talks between the IBA and the UFBU broke off two months ago on the issue of quantum of wage hike. While the UFBU demanded over 20 per cent increase in wages, the Association offered 17.5 per cent. However, the IBA, according to unions, later reduced its offer to 15 per cent at the Government’s behest.
8.Insurance institutes that train agents should self-regulate to maintain professionalism, said Mr A. Giridhar, Executive Director, Insurance Regulatory and Development Authority.Addressing a meeting of (All India) Insurance Training Institutes’ Association (ITIA) here, Mr Giridhar said the training institutes should also think of affiliating with reputed universities/institutions.The Authority is receiving complaints on lack of proper infrastructure in the training establishments and improper maintenance of schedules, he said.“Unless professionalism is achieved in training and in the way the agents are working, this channel will die a natural death,” he said.

IRDA is working on various measures to increase the efficiency of the agents, he added.

9. Axis Bank has opened its branch in Ramagundam in Karimnagar district of Andhra Pradesh on Monday. “This marks a yet another step towards our extensive consumer banking focus,” Mr KVSM Sudhakar, Senior Vice-President, Business Banking- South Zone, Axis Bank, said after inaugurating the branch. Axis Bank has a network of 875 branches, eight extension counters and 3763 ATMs across the country.
10. Gold loans are no longer just for people with limited funding options, says Mr Thomas Muthoot, Director, Muthoot Fincorp Ltd (MFL), a part of the Kerala-based diversified Muthoot Pappachan Group .Many small farmers and businessmen, even when they have other options for funding, prefer to avail themselves of gold loans, Mr Muthoot told Business Line in an interview.MFL was established with the purpose of integrating all group business interests of the parent group in the non-banking financial services sector. It has a network of over 433 branches across Kerala, Tamil Nadu, Karnataka, Maharashtra and Andhra Pradesh.MFL has also tied up with leading financial institutions to offer a host of other services ranging from general and life insurance, auto and home loans and money transfer to investment advisory.Rating agency ICRA recently assigned A1 rating to MFL’s Rs 500-million (Rs 50 crore) Commercial Paper (CP) programme.This is the highest credit quality rating assigned by ICRA to short-term debt instruments.

Tides of 3.05.2009

1. The country's largest lender, State Bank of India, on Saturday reduced deposit rates by 0.25 per cent on all tenures with effect from May 4.

2. The World Bank has approved $400 million additional financing loan to the Small Industries Development Bank of India, which is aimed at improving access to finance for Small and Medium Enterprises (SMEs).

3. Increasing consumer awareness on health, rising healthcare costs, drop in sales of new business for life insurance companies and the recent lifting of price controls in the non-life insurance industry have resulted in insurers focusing aggressively on health insurance to drive growth.

4. Banks and financial institutions may have to undertake an equity restructuring exercise for their downstream businesses following the reluctance of the department of industrial policy and promotion (DIPP) to tinker with the foreign direct investment norms announced in February.

5. Based on the results of recently concluded "stress tests," US regulators told Citigroup Inc and Bank of America Corp they may need to raise more capital, the Wall Street Journal said, citing people familiar with the situation.

6. Rajiv Malhotra regrets being a Citibank cardholder. A Citibank card customer for a decade, Malhotra was checking out from his hotel during a recent visit to China when he found that his cards had been blocked with no intimation for no fault of his.The stranded business consultant had cancel his onward flight and hotel reservations, and found that his card was blocked because of a bounced cheque on outstanding dues which was traced to a scanning error at IDBI bank, from whose account held by Malhotra’s wife the cheque had been drawn.Malhotra  had to cancel his onward flight tickets and onward hotel reservations. The cheque had been issued much before the due date.The customer moved the District Consumer Redressal Forum alleging harassment and was awarded over Rs 2 lakh as compensation on March 26 through order number DF (ND) 1091-1094

7. Oriental Bank of Commerce on Monday said it plans to raise Rs 1,000 crore during the current financial year from bonds to meet business growth."We have a headroom of Rs 4,361 crore, we would raise Rs 1,000 crore from Tier II bonds or perpetual bonds during the year," said OBC Chairman and Managing Director A K Misra.The fund would be raise to meet business growth and maintain Capital Adequacy Ratio over 12 per cent, he said.

8. Corporation Bank has proposed to issue upper tier II bonds for Rs 500 crore on private placement basis, the bank informed BSE. The annual coupon will be 8.25 per cent for first 10 years.

9. Concerns about rising bad loans have weighed on the stocks of most banks in recent months. The March numbers show that while new private banks have reported higher non-performing assets, PSU banks have actually seen a reduction in NPAs.

10. Section 80LA of the Income-Tax Act confers a 10-year tax holiday for banks located in Special Economic Zones (SEZs) with the first five years begetting them tax immunity on 100 per cent of such profits and the next five years on 50 per cent of such profits.

Tides of 30.04.2009

1.     1.  The banking sector stocks in India are catching investors' fancy fast. At a time when global banks are struggling to stay afloat, Indian banks have started to gain on the bourses.

2.       2. Indian corporates have raised $1.11 billion during March-more than double the mop-up in February-through external commercial borrowings both in automatic and approval route.

3.       3.Bank of India’s net profit grew by 7 per cent to Rs 810 crore, for the quarter ended March 31, 2009, from Rs 757 crore in the corresponding quarter last year.

4.       Canara Bank has slowed down its international branch expansion plans in view of the global financial turmoil. Addressing press persons here on Wednesday, the bank Chairman and Managing Director, Mr A.C. Mahajan, said, “We have approvals to open 10 branches, but we are going slow on our overseas expansion in view of the current situation”. Canara Bank currently has RBI approval to open branches in Johannesburg, Frankfurt, Muscat, Manama, QFC-Qatar, Leicester, New York, Sao Paulo, Dar-es-Salam and Tokyo. Referring to the bank’s results for the financial year 2008-09, Mr Mahajan said that the bank was able to record a robust 29 per cent growth in advances. As a result, it reported a growth in net profit by 32.4 per cent to Rs 2,072 crore in FY09. In the fourth quarter of FY09, the bank was able to grow its net profit by 54.9 per cent to Rs 719 crore.

5.    5. T  he net profit of Dhanalakshmi Bank has grown by 101 per cent to Rs 57.45 crore (Rs 28.46 crore) for the year 2008-09. The operating profit grew to Rs 87.90 crore (Rs 44.50 crore). Having surpassed its annual business targets by comfortable margins during the year, the level of business growth is a record in the bank’s history, a press release issued here said. Extending a special thrust to fee-based business, the bank was able to nurture non-interest income by 88 pe r cent, which was one of the principal drivers of the profit growth. There was significant growth in deposits and advances which have surpassed the banking industry average by far. 

6.       State Bank of Hyderabad’s (SBH) net profit declined 7.5 per cent at Rs 172 crore in the fourth quarter ended March 31, 2009 compared with Rs 186 crore in the corresponding quarter of the previous fiscal.This was due to provisioning of Rs 88 crore for salary hikes and pensions of the employees made during the quarter. The interest income, however, grew by 18.5 per cent at Rs 1,487 crore (Rs 1,255 crore).

7.       Led by an increased demand for bank loan ratings, rating agency Crisil’s standalone net profit for the fourth quarter ended March 31, 2009 rose almost 27 per cent, to Rs 36.43 crore from Rs 28.7 crore in the year-ago quarter.Its total income during the period went up 19.5 per cent to Rs 106 crore, from Rs 88.43 crore.“Revenue growth was driven by increased demand for bank loan ratings with around 500 new bank loan ratings announced during the quarter,” said Ms Roopa Kudva, Managing Director and Chief Executive Officer, Crisil.Total expenditure rose 20.6 per cent to Rs.63.34 crore (Rs.52.52 crore).

8.       8.Mr P. Vaidyanathan has assumed charge as part-time non-executive Chairman of City Union Bank. He will function in that position for two years. A chartered accountant by profession, Mr Vaidyanathan has been a member of the bank’s board between 1984 and 1992 and again from 2003. Mr Vaidyanathan is on the advisory committee and board of many institutions including the Disciplinary Action Committee of NSDL and SEBI-sponsored Investors Education and Protection Fund.

9.       State Bank of India has decided to reduce the interest rate on education loans, which will be sanctioned to students pursuing higher studies from May 2009 to September 2009, by up to 200 basis points.The bank said that interest rates on education loans (linked to the bank’s prime lending rate of 12.25 per cent) up to Rs 4 lakhs, above Rs 4 lakhs up to Rs 7.50 lakhs and above Rs 7.50 lakhs will stand reduced to 11.5 per cent (11.75 per cent now), 11.25 per cent (13.25 per cent) and 11 per cent (12.25 per cent) respectively.Girl students will get a concession of 0.50 per cent over and above the card rate. The lower rates are applicable for new loans sanctioned during the May 2009 to September 2009 period. For existing loans, however, the extant rates would continue.SBI extends loans up to Rs 10 lakhs for studies in India and Rs 20 lakhs for studies abroad.

10.   Central Bank of India’s net profit fell by 51 per cent to Rs 62 crore for the quarter ended March 31, 2009, from Rs 127 crore in the same period last year, due to lower interest income and higher provisioning.The bank had bulk deposits worth Rs 32,000 crore, which resulted in higher interest outgo, said Mr S. Sridhar, Chairman and Managing Director. Of this, the bank has shed deposits worth Rs 11,000 crore.High cost deposits pushed up the bank’s cost of funds to 6.9 per cent (6.27 per cent) and also put pressure on the net interest margin, which came down to 1.43 per cent (2.1 per cent).

Tides of 27.04.2009

1. While cash and banking stocks emerged as major parking slots for equity funds in March 2009, companies in the engineering and capital goods segment were among the biggest losers compared with the deployment of funds in March 2008.A sector-wise break-up of investment data by Plexus Management Services reveals that in actively managed open-ended equity funds (diversified, mid cap, tax plan, infrastructure, dynamic and theme fund) for March 2009, it is seen that the allocation into cash stands at 14.3 per cent from 7.4 per cent in March 2008.
2. ICICI bank, the country’s largest private sector bank that has been fighting bad loans and slowdown in loan growth, declared a dip in net profit that stood at Rs 3,758.13 crore at the end of March 2009, against Rs 4,157.73 crore at the end of 2008.The bank’s fourth-quarter profit too fell 35.3 per cent to Rs 743.76 crore at the end of the quarter ending March 2009, against Rs 1,149.84 crore at the end of the quarter ending March 2008. ICICI Bank’s non-performing advances rose from 1.5 per cent in March 2008 to 1.95 per cent in March 2009.
3. Donning the role of a commander ill-equipped to save the Titanic of the banking world, Citigroup’s India-born chief Vikram Pandit has found a place among the 20 worst-ever CEOs in American history. The top honour has gone to bankrupt Lehman Brothers’ Dick Fuld.The list of America’s 20 worst-ever CEOs, compiled by business magazine Conde Nast Portfolio after consulting with a panel of business school professors, identifies the business “leaders who helped drive their companies into the ground”. It includes “six men who helped make today’s economy stink”, the magazine said.
4. Home loans lender HDFC has no plans to lower its interest rates as of now, its top executive said."We have no plans to lower our interest rates as of now," HDFC's Chairman, Deepak Parekh, told reporters on the sidelines of a function here today.
He said that the Reserve Bank has pegged GDP growth rate for this fiscal at six per cent.
On inflation, Parekh said that the wholesale price index (WPI) was low whereas the consumer price index (CPI) was still high.
5. State Bank of India (SBI) on Wednesday said it would launch 700 branches in this financial year, a hundred less than half of last year.“We will add 700 more branches this year,” SBI Chairman O P Bhatt said.Last financial year, the bank had opened 1,600 branches.Of the 700 branches, many would be opened in rural areas, Bhatt said.
Like last year, this year the bank plans to reach out to 50,000 villages where there are no banking operations, he said.The reach out could be through an ATM machine or a point of sale, he said.The bank would like to raise about Rs 20,000 crore subject to government approval, he said.
6. State Bank of Travancore (SBT) has posted a net profit of Rs. 607.84 crore during 2008-09, the bank’s Managing Director A. K. Jagannathan announced here on Friday. At a press conference, he said the net profit was 57.43 per cent more than that in the previous year. In 2007-08, the net profit was Rs. 386.11 crore. The operating profit in 2008-09 was Rs. 1,056.27 crore, as compared to Rs. 709.09 crore in 2007-08. During the last quarter of 2008-09, which coincided with the unfolding phase of the global economic recession, the bank registered an increase of 29 per cent in net profit over the corresponding quarter of the previous year.The net profit during the quarter stood at Rs. 192.03 crore as against Rs. 149 crore. The higher profit was due to a rise in net interest income, which at Rs. 328.79 crore, was 31 per cent more than Rs. 250.43 crore recorded during the same period of the previous year. The directors have announced a dividend of Rs. 13 per share of Rs. 10 each for the year.
7. State Bank of Bikaner & Jaipur has recorded a business (deposits plus advances) growth of Rs. 9.885 crore during 2008-09 to reach a level of Rs. 69,312 crore. The operating profit recorded a growth of 35 per cent to reach Rs. 892.84 crore while the net profit increased by 28.1 per cent to Rs. 403.45 crore from Rs.315 crore in 2007-08. The directors have declared a dividend of Rs. 12 per share (face value of Rs.10), against 10 per share paid in the previous year.
8. Standard Chartered Bank has started the process to raise around Rs 5,000 crore through an Indian Depository Receipts (IDR) issue in the local markets. The bank has appointed JM Financial and UBS AG as lead managers for what could be the first IDR issue by a global player. Goldman Sachs, Bank of America and Kotak Mahindra are the other banks appointed to manage the issue.
9. Rising delinquencies and non-performing assets (NPAs) in the credit card business are forcing banks to reorient their outlook, from an aggressive sales strategy to inducting people who will focus on recovery and cleaning up the portfolio. As a result, the past year has seen all the four leading players in the credit card business replacing their chiefs. In March last year, T R Ramachandran, business manager (cards) of Citibank was shifted as head of the retail banking division. He was replaced by Sandeep Bhalla, who had experience in the cards business in the US, in May. In October, Ramachandran quit Citibank to become CEO of Aviva Life Insurance. Asked about the change, a Citibank spokesperson said in an emailed statement, “The last year has seen strong managers such as Sandeep Bhalla, Business Manager-Cards, and Harjeet Chopra, Country Risk Manager, join the India Consumer organisation from Citi overseas. Grooming senior managers who have experience across businesses, functions and geographies is critical to Citi's talent strategy and we take this task very seriously.”
10. State Bank of India has agreed to lend Vodafone-Essar, the joint venture between UK’s Vodafone and Essar, Rs 10,000 crore to finance the company’s entry into 3G (third generation) telecom services and expansion of its broadband operations. The five-year loan carries an interest rate of 13.25 per cent for the first two years; thereafter, it will be re-adjusted on the basis of the average prime lending rate of four public sector banks — SBI, Punjab National Bank, Canara Bank and Bank of Baroda, sources said.Banking sources said SBI had decided to down-sell Rs 7,000 crore to other banks and financial institutions and will retain an exposure of Rs 3,000 crore. The interest rate for the first two years is a percentage point above SBI’s benchmark prime lending rate.

Tides of 23.04.2009

1.Private sector lender Yes Bank today said its net profit rose 24.20 per cent to Rs 80.11 crore during the fourth quarter of FY09 despite an eight-fold increase in gross non-performing assets (NPA). Net interest income in the quarter rose 45.4 per cent to Rs 155.2 crore, as against Rs 160.7 crore in the year-ago period. However, its non-interest income declined 16.6 per cent, from Rs 107.6 crore in the quarter ended March 2008 to Rs 89.8 crore in the quarter under review. Gross NPAs rose to Rs 84.93 crore during the quarter, as against Rs 10.57 crore last year. As a proportion of advances, gross NPAs were estimated at 0.68 per cent at the end of 2008-09, as against 0.11 per cent in the corresponding period in the previous year. Higher gross NPAs have resulted in a 40.93 per cent increase in non-tax provisions to Rs 32.19 crore.

2. Shikha Sharma, who is likely to join Axis Bank in August, will have to start the search for at least two top-level executives soon after she takes over as the managing director and chief executive officer.Of the four internal contenders who were in the reckoning for the top job at the country’s third largest private sector lender, MM Agarwal, executive director for corporate and international banking, has already expressed his desire to leave the bank. Though V K Ramani, ED for technology and business processes, is unlikely to quit immediately, he is scheduled to retire by October-end.

3. Infrastructure Development Finance Company (IDFC), a non-banking finance company (NBFC), has revived its plan to enter the banking space.Sources close to the development told Business Standard that IDFC is hunting for a mid-size private sector bank that could lend the company a banking status through a share swap deal.A source close to the development said that IDFC, which has been trying to get a banking licence from the Reserve Bank of India (RBI) for over a year now, has appointed two investment banking firms — IDFC-SSKI and Kotak Mahindra Capital — as advisors for working out modalities on shortlisting a bank for a potential merger.

4. State Bank of Mysore (SBM), the Bangalore-based associate bank of SBI, is aiming at a growth of 30.9 per cent growth in its advances to Rs 33,880 crore and 29.3 per cent growth in deposits at Rs 41,888 crore for FY10 as compared to FY09.

5. There has been a sharp increase in the use of IT in banking services. The Reserve Bank of India devoted almost three pages to it in Annual Policy Statement for 2009-10, released on Tuesday. With the cellular user base expected to touch 600 million by 2010, the volume of pre-paid card recharging alone could exceed the $4-billion mark. Bharti Airtel launched its mobile payment services in June 2008 and has already got one million registered users. “mCommerce will be one of the top three services offered over mobile in the future,” said an Airtel spokesperson. International remittance is another service that operators are piloting in India.

6. HDFC Bank, the second largest private sector bank, has reduced the interest rates on deposits of some tenors by 25-35 basis points, with immediate effect.According to data on the bank’s Web site, the bank has cut the rates on deposits having maturity periods ranging from one year and up to eight years to 7.75 per cent.

7. The Reserve Bank of India has deferred the opening up of the banking sector for foreign players and decided to continue with the current policy and procedures governing the presence of foreign banks in India.In its Annual Policy Statement 2009-10, the RBI said, “In view of the current global financial market turmoil, there are uncertainties surrounding the financial strength of banks around the world. Further, the regulatory and supervisory policies at national and international levels are under review.”

8. Though banks are reluctant to cut rates, some will prune their deposit rates within a month; rates for certificate of deposit (CD) were already down on Tuesday. Lending rates could soften at a later stage. Payment of interest on savings bank account on a daily product basis, wef April 1, 2010 I: Savers will get more out of their savings account and banks’ total payout would be much more. So, if an investor parks Rs 2 lakh and withdraws it 2 days later, she will get interest for two days instead of the lowest balance between 10th and 30th of a month. This is similar to liquid schemes of mutual funds.

9.Kotak Mahindra bank plans to file a petition against the merger of the two companies before the Madras High Court on Thursday — a day ahead of the hearing of a string of petitions on the same issue, including those by Azim Premji’s Zash Investment and ICICI Venture. Meanwhile, the Madras High Court on Wednesday directed Subhiksha Trading Services to submit copies of balance sheets of the past three years and all accounts from April 2008 till date to the provisional liquidator (PL) appointed by the court. It gave the respondent 10 days to submit the same.

10. Banks' settlement with defaulting borrowers will now specifically exclude criminal cases lodged and proceedings with regard to criminality would continue even after the settlement of the civil cases, Indian Banks' Association (IBA) said on Thursday. The IBA decision comes against backdrop of two recent cases where the courts absolved the defaulting borrowers of any criminal wrongdoing who had entered into One Time Settlement (OTS) agreements with banks and where banks withdrew all charges against them.

Tides of 22.04.2009

1. The Reserve Bank of India on Tuesday cut key policy rates – repo and reverse repo – by 25 basis points each in order to push banks to lend more at viable rates and prop up the sagging economy.The underlying message from the banking regulator’s rate action was clear – banks should follow suit by reducing their lending and deposit rates in order ‘to support the return of the economy to a higher growth path’.The RBI, in its Annual Policy for 2009-10, reduced the reverse repo rate – the interest rate RBI pays to banks on the funds deployed with it – to 3.25 per cent (lower than the savings bank rate of 3.50 per cent) and the repo rate – the interest rate that banks pay on funds borrowed from RBI – to 4.75 per cent.
2. You can take a horse to water but can you make it drink? This is the question that the Reserve Bank of India has failed to answer in its Annual Policy Statement for 2009-10. In order to force banks to lend to entities other than itself, the RBI has reduced the reverse repo rate by 25 basis points to 3.25 per cent from 3.75 per cent. This will make it less profitable for banks to lend to the RBI. This, in turn, the RBI hopes, will force them to lend to private sector customers. The credit-deposit ratio has declined sharply from 74 to 71 per cent in four months. Says Prof Suresh Tendulkar, Chairman of the Prime Minister’s Economic Advisory Council, “How will they stay in business if they don’t lend?”
3. In a move that would allow banks to expand their ATM networks more easily, the Reserve Bank of India has done away with the requirement of prior regulatory approval for setting up offsite ATMs. These are standalone ATMs outside branch premises. RBI had earlier dispensed with the requirement of obtaining regulator permission for onsite ATMs (ATMs at branch premises). Currently, banks approach RBI for approval for setting up offsite ATMs. After making a medium-term plan about their requirements of branches and ATMs, banks approach the central bank for permission and proceed with setting them up after receiving the approval.
4. If you have a salary account/savings bank account in a bank, it is better if you withdraw money as per your requirements instead of at one go. From next April, the balance in your savings account will earn interest on a daily basis, following the Reserve Bank of India’s decision to implement new interest calculation methods on such accounts. The payment of interest on SB accounts (3.5 per cent at present) would be calculated on a daily product basis with effect from April 1, 2010. For Rs 1,000, you will get an annual interest of Rs 35 which will be divided into per day interest to be credited to one’s account.
5. All commercial banks were Basel-II compliant as on March 31, 2009, the Reserve Bank of India said. Initially the base approach of the Basel II framework had been adopted, the central bank said. As for the advanced approach to the Basel-II framework, the RBI said it had placed on its Web site a draft circular giving an indicative timeframe for implementation. The enhancement to current Basel-II framework by the international standard setting bodies will be considered for im plementation as appropriate, according to the RBI. These have been mentioned in an annexure, forming part of the annual policy statement, that spells out the Reserve Bank’s status on the recommendations of the G 20 working group on “Enhancing Sound Regulation and strengthening transparency”.
6. The Reserve Bank of India on Tuesday further eased norms for Indian companies to use their internal accruals for buy-back of their foreign currency convertible bonds, as corporate houses continue to queue up to buy back their foreign loans at a deep discount.In its Annual Statement of Monetary Policy, the central bank has proposed to increase the total amount of permissible buyback of FCCBs, out of internal accruals, from $50 million of the redemption value per company to $100 million. The central bank has linked the higher amount of buyback to larger discount.The RBI had begun to liberalise the buyback policy in December 2008. On March 13, 2009, RBI further liberalised the norms by extending the deadline for companies to complete the buyback by nine months from March 31, 2009 to December 31, 2009.
7. The Reserve Bank of India has decided to constitute a Working Group to review the present benchmark prime lending rate (BPLR) system and suggest changes to make credit pricing more transparent. The Working Group would consult all the stakeholders and submit its report by end-August 2009, the RBI said in its Annual Policy Statement 2009-10.Explaining the rationale behind the move, the RBI said that over time, the system of BPLR has lost its relevance as a meaningful reference rate as majority of loans sanctioned by banks are at rates below the BPLR.
8. ICICI Bank on Tuesday announced a 50 basis points cut in its corporate and retail lending rates with immediate effect. The bank also said it is cutting fixed deposit rates across various tenors by 25 to 50 basis points, with effect from April 24. ICICI Bank cut its Floating Reference Rate (FRR) for consumer loans, including home loans to 13.25 per cent from 13.75 per cent. All existing floating rate customers will be benefited by the reduction in the FRR.The bank also cut its Benchmark Advanced Rate, for its corporate customers, to 16.25 per cent from 16.75%.

Tides of 26.01.2009

1. Citigroup has sold government guaranteed bonds worth 12 billion dollars, which will help the beleaguered entity to boost its balance sheet. The Financial Times has reported that Vikram Pandit-led Citi has sold "$12 billion of government-guaranteed bonds, the largest issuance since the US authorities agreed to backstop financial companies' short-term debt in November".
Further, the daily noted that the issue surpasses a $10 billion offering by General Electric as the largest bond issue to be guaranteed by the Federal Deposit Insurance Corporation as part of the government's efforts to help the financial sector.Citi has posted losses for five consecutive quarters, with $8.29 billion of losses in the fourth quarter of last year alone.

2. A further cut in policy interest rates is expected when the Reserve Bank of India (RBI) conducts its third quarterly review of the monetary policy on Tuesday. A 50 basis point (100 basis points is 1 percentage point) cut in the rate at which the central bank provides overnight liquidity to banks (repo rate) as well as the rate at which it absorbs liquidity from banks is widely expected.RBI has the ability to lower policy rates since economic growth is slowing down, commodity prices are falling, and more cuts in fuel prices are on their way. “We expect the inflation rate to fall to around 2.9 per cent in March,” said Shailesh K Jha, senior regional economist, Barclays Capital.Namrata Padhye, economist, IDBI Gilts, seeks a wait and watch approach. “A gradual approach towards easing would ensure that no panic is created in markets over the outlook on domestic economy.”Since September 15, 2008, the RBI has eased policy rates by 350 basis points, but banks have reduced rates, grudgingly, by just 150-200 basis points.

3. The country's largest lender State Bank of India's net profit for the October-December quarter jumped by 52 per cent to Rs 3,713.66 crore. The bank had a consolidated net profit of Rs 2,442.32 crore in the December quarter last year, SBI said in a filing to the Bombay Stock Exchange.Total income rose to Rs 30,313.14 crore in the third quarter, from Rs 24,380.99 crore a year ago, a jump of 24 per cent.On a standalone basis, the bank recorded a net profit of Rs 2,478.42 crore during the quarter under review, whereas it had a net profit of Rs 1,808.64 crore in the same quarter a year ago.During the quarter, standalone total income stood at Rs 21,256 crore, while it was Rs 15,364 crore last fiscal.The interest income of the bank went up by 42 per cent at Rs 18,030 crore as against Rs 12,667 crore in the same quarter a year ago.

4. India's second largest lender and largest private lender, ICICI Bank, has posted a Rs 1,272.18 crore net profit for the quarter ended December 31, 2008, as compared to Rs 1,230 crore in the year ago period, showing a rise of 3.41 per cent. The total income of the bank during the quarter grew to Rs 10,351 crore against Rs 10,338 crore in the same period of 2007-08.

5. The central government and the Reserve Bank of India (RBI) will jointly work to chart out more stimulus packages for industry, Home Minister P Chidambaram said in Chennai Saturday.
"The country is facing only a slowdown and not a recession. Counter and corrective measures have to be taken to increase domestic demand," Chidambaram said.Launching the BYST Growth Fund promoted by Bharatiya Yuva Shakthi Trust (BYST), a charitable organisation that helps underprivileged youth set up businesses, the International Finance Corp (IFC), and private equity fund VenturEastthe, the former finance minister added that the government is taking fiscal measures while RBI is taking monetary measures for that purpose.

6. The Prime Minister's economic panel today said banks are currently not cutting lending rates much as their deposits rates are high, but hoped that they would slash rates gradually."They (banks) find themselves in a fix. Deposit rates have been raised and the lending rates cannot be reduced significantly immediately. So, I think that is the bind in which they are," Prime Minister's Economic Advisory Council Chairman Suresh Tendulkar told reporters in New Delhi.
He, however, said banks would gradually cut down interest rates.Tendulkar, however, refused to hazard any guess or make any prescription for RBI on interest rates in its forthcoming quarterly review of monetary policy slated for January 27."It is for RBI to take a call. I will not make any suggestion on that part," he said.

7. HDFC Bank and ICICI Bank that maintain salary accounts of Satyam employees said they were not holding any ‘fake’ accounts while Citibank declined to comment.The public prosecutor in the Satyam scam case alleged on Thursday that Satyam had as many as 13,000 fake salary accounts. Banks, however, maintained that there have been no irregularities in the know your customer (KYC) procedure and they do not have any fake accounts with them.“We have no salary account with any other bank,” a Satyam spokesperson said when asked whether there were more banks handling employees’ salaries.“There has been no irregularity at our end and we have done our due diligence,” said an official with one of the three banks who did not wish to be identified.

8. Andhra Bank expects an overall business growth of 23 per cent in the eastern region by the end of this fiscal. The bank has set a target of achieving a total business of Rs 3,140 crore in the region by March 2009, as against Rs 2,370 crore till December 31, 2008. The total business of the bank was Rs 95,770 crore till December 2008, and it expects to cross Rs 1,00,000 crore mark by the end of this fiscal, and Rs 1,50,000 crore by September 2010, said Ramakrishnan K S, zonal manager, Andhra Bank at a press conference in Kolkata on Saturday. The bank has taken several initiatives like to boost current account and saving accounts (CASA) deposits, which is nearly Rs 500 crore in the region. The bank has 23 branches in West Bengal, and has applied for licences with the Reserve Bank of India (RBI) to open additional four branches in the state.The bank also expects to have all its 1,410 branches under core banking solutions (CBS) by the end of this fiscal.

9. Chennai-based IndBank Merchant Banking Services, a subsidiary of Public-sector lender Indian Bank, is planning to open 30 branches and 200 terminals over the next 15-24 months. The bank is also planning to invest Rs 18 crore through equity once the market condition improves.Meanwhile IndBank has reported a net loss of Rs 0.97 crore during the third quarter ended December 31,2008 as compared to a profit of Rs 10 crore during the same period of the previous financial year.

10. The Centre along with the Reserve Bank of India (RBI) has extended credit to the tune of Rs 7,200 crore to Small Industries and Development Bank of India (Sidbi) for the development of the medium, small and micro enterprises (MSME) sector, which contributes 8 per cent to the country’s GDP and 40 per cent to the total exports.

Tides of 13.01.2009

1. With the easing of yields and the likelihood of a further fall, there has been a flurry of Tier-II and perpetual debt issuances by banks to raise capital. Most banks will be required to enhance or add up capital as they are likely to expand 25-30 per cent this fiscal. Also, with the deadline of March 31, 2009 for implementation of Basel II norms approaching, banks are looking to maintain a cushion in their levels of capital adequacy, said analysts. As inflation and interest rates were higher in the first two quarters, there were not many bond issuances. Therefore, the December-January period is seeing hectic activity in the bond market as banks rush to raise capital to avoid bunching up of issues towards the end of the fiscal. Some banks that are likely to come out with bond issues in the near future include Bank of India, Canara Bank, State Bank of India, IDBI Bank, Union Bank of India, Corporation Bank, Allahabad Bank and Bank of Baroda.

2. South Indian Bank’s net profit for the quarter ended December 2008 increased by 33 per cent to Rs 54.20 crore against Rs 40.72 crore for the corresponding quarter of the previous fiscal.The bank is targeting a net profit of Rs 190 crore this fiscal. It has achieved Rs 144.50 crore in the first three quarters. Though credit growth has been less compared with the earlier years, it has grown by 13 per cent year-on-year, its Managing Director and CEO, Dr V.A. Joseph, said. Out of the aggregate business of Rs 27,779 crore as at December 2008, advances accounted for Rs 11,340 crore (against Rs 10,020 crore as at end December 2007).

3. Having achieved a national footprint and scale of operations, ING aims to double its market share in the country’s financial services sector. Towards this, the company has been carrying out a series of marketing activities, including a television commercial.Currently, the market share of each of ING’s three businesses in India (banking, asset management and insurance) is between 1 and 2 per cent. ING’s business footprint is across tier 1, 2 and 3 cities. While the life insurance business is present in 232 cities, the bank is present in 300 cities.

4. In a further setback to the Indian IT sector, the World Bank made public it has barred Wipro Technologies and Megasoft Ltd since 2007 from receiving direct contracts under its corporate procurement program. The Bank said Wipro’s offer of American depository shares (ADS) to its staff as part of public offering in 2000 was against its policy and it banned the vendor till 2011.
The Bank made public the names of debarred companies on January 11 under the new disclosure policy, stating the “change (in policy) was in the interest of fairness and transparency.” Analysts said the Bank’s move could have been prompted by the Satyam episode.It banned Megasoft Ltd for four years from December 2007 for participating in a joint venture with Bank staff while working with the Bank. Earlier, it put a ban on Satyam currently in the news for Rs 7,000 crore accounting fraud.

5. If you have a health insurance policy with a cover below Rs 1 lakh, you may soon be able to enjoy portability of your policy from one insurance provider to another. The General Insurance Council (GIC), in a crucial meeting held recently, favoured the portability for policies below Rs 1 lakh and formal guidelines to this effect would be sent to the Insurance Regulatory and Development Authority (IRDA) soon, Mr M. Ramadoss, Chairman, Oriental Insurance Company and member of GIC, told Business Line. Under present norms, a policy holder is given health cover for a year which has to be renewed every year. If there is no claim, the policy-holder is entitled to a bonus in the form of an increased sum. In addition, the bonus gets accumulated for every claim-free year.

6. With the rate of inflation declining steadily in recent weeks to touch a 10-month low of 5.91 per cent (week ended December 27), there is possibly a smug feeling in New Delhi that the price situation is fully under control. The fact is it is not. International prices of an array of commodities have no doubt declined in the last four months. While global growth concerns have weakened the demand side, drying up of liquidity, rising inventories and exit of speculative capital have contributed to the poor price sentiment. Producers have promptly responded with output cuts — OPEC has cut crude output by as much as 4 million barrels a day. There is reason to believe that supply is declining faster than demand as a high rate of compliance on part of OPEC and continued disappointing non-OPEC production are more than offsetting demand weakness.

7. German Chancellor Angela Merkel's government is to hammer out a major new stimulus package this week for Europe's biggest economy but her fractious coalition is still divided on the details.

8. The government is looking at a plan to inject public funds into 40 or more regional banks, whose capital bases are being hurt by rising bad loans amid the financial crisis, the Mainichi newspaper reported on Wednesday.

9. ICICI Bank that pioneered 12-hour banking (8 am to 8 pm) in the country, is gradually cutting down its business hours in branches. After cutting down business hours at many of its branches by 3 hours from December, the bank has now decided to cut down business hours at all its branches on Saturdays. The second largest bank has decided to cut business hours at its branches on Saturdays to 5 hours, from 9 am to 2 pm.Decision to cut business hours on Saturdays will be effective from February 7, the bank said on its website.

10. Bankers to Maytas Infrastructure and Maytas Properties are reviewing their exposure to both the companies in view of the rise in risk. The fear is that project delays could result in guarantees being revoked.With growing controversies around the Ramalinga Raju family-promoted entities, banks will play safe”, said a top official of a public sector bank.State Bank of India, which has an exposure of less than Rs 500 crore, is reviewing all these accounts and sharing information with both the central government and the Reserve Bank of India to see if there is a need to take proactive action, SBI Chairman O P Bhatt said on the sidelines of 'Vibrant Gujarat’ in Ahmedabad On Monday.Bhatt, however,said there is no problem with the Maytas accounts and the entire exposure is collateralized. “No personal loans have been given to Raju and his sons,”.he said.Confirming the review of exposures, ICICI Bank said in a statement, “We are a banker to the company and are reviewing our exposure.” It, however, did not elaborate on the kind and the extent of its exposure.“We cannot comment on individual lending exposures. We will issue any disclosures if and when we assess that there is an impact that requires such disclosure”, India’s second largest lender said.

Tides of 24.12.2008

1. Private sector banks have sought relaxation in the present norm that limits the deployment of business correspondents within 15 km range of a branch to give them flexibility in operations to meet the target for financial inclusion. The original intention of the 15-km restriction was to ensure timely service to customers, especially in the rural areas. But now, new generation private banks do not have an extensive branch network in semi-urban and rural areas.
2. The work at the insurance offices in northern Karnataka came to a standstill on Tuesday following the strike call by the Insurance Employees Associations to the Centre’s move to introduce two bills concerning insurance sector. Class I, III and IV employees of LIC and class III and IV employees of General Insurance Corporation participated in the strike. They also opposed the introduction of bill to amend GIBNA Act 1972 and LIC Act 1956.
3. The government today issued 6.35 per cent Oil Marketing Companies Government of India Special Bonds, 2024 for Rs 22,000 crore to three oil marketing companies. These bonds were distributed to Indian Oil Corporation (Rs 11,975.51 crore), Hindustan Petroleum (Rs 4,693.73 crore)and Bharat Petroleum (Rs 5,330.76 crore). These bonds have been issued for compensation towards estimated under-recoveries on account of sale of sensitive petroleum products in the current financial year.
4. State Bank of India (SBI) plans to raise capital up to Rs 1,500 crore through lower tier-II bonds to shore up capital adequacy ratio and support business growth. These bonds carry AAA/stable rating from Crisil. The tenure of this paper is expected to be 10 years. “The yields on the 10-year government bonds dipped from around 8.6 per cent at the end of September to about 5.7 per cent now. Hence, the bank will save on costs as it will be in a position to place bonds at lesser rates now,” a senior SBI official said.
5. The government is likely to announce in a few days details of insurance sops on export credit to banks and exporters as part of the first fiscal stimulus package, said S Prabhakaran, executive director, Export Credit Guarantee Corporation of India (ECGC). “The government will compensate an additional 10 per cent for insurance to exporters and overseas buyers, as well credit guarantees operated for banks.
6. Despite sharp erosion in the net worth of airline companies due to losses in the recent past, banks and financial institutions have decided to sanction loans to some of them including Jet Airways and Kingfisher Airlines, while some of the companies in this sector are still waiting. According to senior officials of a public sector bank, full service carrier Jet Airways has been sanctioned a loan worth Rs 700-800 crore from a consortium of public sector banks that includes Punjab National Bank and State Bank of India.

Tides of 30.10.2008

1.While there is a global credit crisis hitting the world’s leading banks, the country’s largest bank is cruising in profit mode, but is in no mood to reduce lending rates to stoke demand-led growth.The State Bank of India (SBI) said on Monday it would maintain “status quo” on lending rates even though there were signs of that softening in the coming months.“Interest rates have peaked. You could see some moderation in coming months,” SBI Chairman OP Bhatt said after announcing a 40 per cent increase in net profit during the second quarter ended September 2008 compared with the same period a year ago.Bhatt said inflation was beginning to moderate and there was adequate liquidity in the system.
2. ICICI Bank, India's second-largest bank, reported a 1.1 per cent rise in quarterly net profit, beating forecasts, as higher other income and lending rates offset investment losses and slowing credit growth.The country's leading private-sector bank, which is also listed in New York, said July-September net profit was 10.14 billion rupees ($203 million), up from 10.03 billion rupees a year ago.A Reuters poll of analysts had forecast a 2.3 per cent dip in net profit to 9.80 billion rupees for the fiscal second quarter.ICICI has borne the brunt of investor concerns about the Indian bank sector's exposure to the global financial crisis. Since the bankruptcy of Lehman Brothers last month, it has repeatedly said it was well-capitalised and deposits were safe.
3.The Reserve Bank wants depositors to get less, so that borrowers can get loans cheaper. It wants public sector banks to reduce interest rates on deposits.In a rare move, the central bank did this alongside Governor Duvvuri Subbarao’s maiden policy, with the assurance that liquidity (funds) will not be a constraint, three public sector bank executives told Hindustan Times on condition of anonymity. What this means is that the RBI would release funds from its own system.Subbarao addressed chiefs of state-owned banks after Friday’s policy and seemed to be looking for a new way after banks declined to take a cue from last Monday’s one percentage point cut in the repo (repurchase) rate at which RBI lends money to banks for up to two weeks.Banks have been complaining about deposit rates being too high, with fears that depositors may flee if rates were cut. Now, RBI is offering a cushion against that. One banker said RBI is trying to convey the impression that high interest rates are hurting industry and accentuating a slowdown.
4. Bank of Baroda on Saturday said its net profit for the second quarter ended September 30 stood at Rs 395.29 crore, a 20.81 per cent growth over the corresponding period a year ago.The bank had a net profit of Rs 327.19 crore for the September quarter last fiscal, Bank of Baroda said in a filing to the Bombay Stock Exchange.Total income rose to Rs 4,026.90 crore for the quarter under review from Rs 3,333.83 crore for the same period last fiscal.For the six months ended September 30, 2008, Bank of Baroda registered a net profit of Rs 766.14 crore, against Rs 658.03 crore for the same period last year.While, total income for the six months ended September 30 rose to Rs 7,833.26 crore from Rs 6,358.63 crore for the same period a year ago.The RBI’s best GDP growth estimate now is 7.5-8.00, down from 8.00 per cent forecast in April 2008 and July 2008, compared with 9 per cent growth in 2007-08.
5. The Reserve Bank of India (RBI) had no choice but to sit tight during the quarterly monetary policy review released on Friday, though it led to the steepest ever fall in Indian stock markets, according to global rating agency Moody's.In the latest mid term policy review, the central bank left repurchase rate, reverse repurchase rate and the cash reserve ratio unchanged at 8 per cent, 6 per cent and 6.5 per cent, respectively.“The recent slide of the rupee has stopped the central bank from further loosening monetary policy, which may stimulate the economy but increase the risk of capital flight,” Sherman Chan, economist with Moody's economy.com said.“The rupee has shed more than a quarter of its value breaking the important psychological level of $50. This is extremely concerning, from a macroeconomic management perspective, as a weak currency creates inflationary pressures.“Wholesale price growth, despite gradually easing, is still in double-digit territory, and this is viewed as 'unacceptable' by the central bank, whose tolerance rate is set at 5 percent.
6. State-owned commercial banks are expected to garner at least Rs 20,000 crore of additional bulk-deposits from public sector enterprises following an advisory from the finance ministry that government-owned companies should park their surplus cash with state-controlled banks.
7. Union Finance Minister P Chidambaram will meet the heads of public sectors banks and financial institutions, like IFCI and Small Industries Development Bank of India (Sidbi) on Tuesday to review their performance for the second quarter ended September 2008.
8. Regional rural banks (RRBs), which have been playing a key role in rural lending, are now seeking more visibility and parity with commercial banks.The RRBs have complained to the government that some state governments, corporations and embassies are not treating them on par with other banks.
9. Non-deposit-taking non-banking finance companies (NBFCs), with an asset size of Rs 100 crore and above, can now increase their capital funds by issuing perpetual debt instruments (PDIs).
10. Private sector Federal Bank, with its Rs 48,000-crore business, is looking to enter the wealth management space, especially for catering to its huge NRI clientele.

Tides of 23.10.2008

1. The Reserve Bank further relaxed external commercial borrowing guidelines and allowed companies to bring in funds up to $500 million for rupee expenditure under the automatic route.

2. ICICI Home Finance Co (I-HFC), the home-loan arm and subsidiary of ICICI Bank, has increased the interest rate on its new home loans by 1 percentage point.

3. P Chidambaram said Govt will inject fresh capital in seven public sector banks to improve their financial health and help them achieve a capital adequacy ratio of over 12 per cent.

4. Many banks are still busy borrowing large amounts from the Reserve Bank of India, while policy-makers in New Delhi ponder measures to keep the cash taps flowing.

5. As a result of the global credit crunch several countries have passed laws guaranteeing their depositors' savings.

6. The decline in growth in insurance premium collection, post the rise in inflation and global economic slowdown, has affected the state-owned Life Insurance Corporation the most.

7. Though the Govt has talked down inter-bank borrowing rates, the nation’s banks are still has large liquidity gaps — which means they are short of cash to meeting commitments.

8. With the global financial crisis spreading its wings across the globe, the Indian banking industry has quietly adopted a cautious lending policy, particularly towards the small and medium enterprises (SMEs).

9. The Reserve Bank of India has issued guidelines paving the way for subscribers of mobile-banking services to send and receive up to Rs 5,000 a day through their phones.

10. Investors depositing their money with the banks are opting for long term maturity plans instead of medium and short term to park their money, says an RBI report.

Tides of 22.10.2008

1. Pulock Chatterji, Secretary in Prime Minister Manmohan Singh's Office, has been appointed as the new executive director of World Bank for a term of three years beginning February 1, 2009.

2. The big banks are safe and smaller ones are getting a face lift. The government on Monday sought parliament approval to restructure the capital base of state-owned Uco Bank and Punjab & Sind Bank, aiming to help them lower their equity that would increase earning-per-share as they dress up go public. A supplementary demand for grants Finance Minister P Chidambaram said the government plans to convert Rs 250 crore of Uco Bank’s equity into “perpetual non-cumulative shares,” while Rs 560 crore of Punjab and Sind Bank will be converted into similar debt instruments.

3. If you are waiting to see a cut in your home or car loan rate after Monday’s cut by the Reserve Bank of India (RBI) in its signal repurchase (repo) rate by one percentage point, you may have to wait longer. Bankers are waiting to see what it does to their costs – and that may take a couple of months. There is nothing on the horizon to suggest a deposit rate cut either, because the RBI has freed up more than Rs. 1,00,000 crore from its cash reserves since October 11. The Prime Lending Rate (PLR) that bankers set is yet to take a cue from the repo.

4. The Indian government on Monday said banks have exposure of US$ 336 million in US-based investment bank Lehman Brothers, which has filed for bankruptcy.The banks' exposure to Lehman Brothers is US$ 336 million (Rs 1,580 crore) as on September 30, Finance Minister P Chidambaram told Lok Sabha in a written reply.The exposure mainly consisted of investments in floating rate notes, nastro balances, bank guarantees, forex exposures, etc, he said.
The banks have made aggregate provision of US$ 47.3 million (about Rs 220 crore) on these exposures.

5. Indian Bank has earned a net profit of Rs 282.93 crore for the first quarter of the current fiscal against Rs 247.59 crore for the corresponding period of last fiscal. The Bank Chairman MS Sundarajan, releasing the unaudited financial results for the quarter, told reporters that the profit recorded a growth of 14.27 per cent over the previous year.The deposits, gross advances and total business also recorded a growth of 20.22 per cent, 47.36 per cent and 30.47 per cent respectively during the quarter.The deposits stood at Rs 64,614 crore against Rs 53,747 crore for the corresponding period of the last fiscal, advances at Rs 48,092 crore against Rs 32,636 crore and total business was Rs 1,12,706 crore against Rs 86,383 crore, he said.He said that the current global financial problem would not have any impact on the Bank's performence as it had lot of liqudity.

6. Public sector banks (PSBs) are giving more trouble to cash-crunched mutual funds (MFs) by not honouring some credit instruments and charging as high as 16 per cent, despite a special lending window set up by Reserve Bank of India (RBI) this week.MFs have seen Rs 36,000 crore flow out this month due to liquid fund redemptions by corporate customers, after a drain of Rs. 45,000 crore in September.The RBI has allowed MFs to borrow against bond-like certificates of deposits (CDs) but state-run banks are not accepting CDs issued by private banks. “If PSBs are practising discrimination on the papers of private and public sector banks, it is unfair,” said AP Kurien, chairman, Association of Mutual funds of India.

7. Public sector banks, with a market share of over 80 per cent, are gripped with a severe talent crunch. PSU banks are not really hot with those with the right qualifications and the few that do are quick to jump ship, leaving the behemoth banks with an attrition problem. But things might change soon.In a bid to draw talent, attractive pay packages for the entry level employees are on the cards. Industry sources say that the issue will be taken up once negotiations involving trade unions, government and the Indian Banks Association begin for wage revision, which is expected soon.

8. Clearing and settlement of around 120,000 transactions amounting to a total volume of Rs 4 lakh crore on the real-time gross settlement and electronic fund transfer platform came to a grinding halt today as the employees of the Reserve Bank of India (RBI) struck work across the country.there was no settlement in the domestic money market, transactions in the foreign exchange market will be settled tomorrow (under the T+1 settlement as against the usual practice of the real-time settlement).A banking source said that if the current trend continues, state-owned banks would have very few qualified people left to man the show by 2020. About 50 per cent of the officers currently employed with PSU banks are over the age of 40.

9. It had been a week like never before on Wall Street. Lehman Brothers Holdings, the fourth-largest US securities firm, was bankrupt. The credit markets, which Goldman uses to fund its business, were frozen. And Treasury Secretary Henry Paulson, Blankfein’s predecessor as chief executive officer of Goldman, was begging the Congress for $700 billion to save the financial system. Goldman’s stock had plunged as much as 26 per cent in just one day.In the brief meeting in lower Manhattan that warm Sunday, according to a person familiar with the events, Blankfein told his lieutenants the firm would become a bank holding company, ending its run as the jewel of global investment banks.

10. ICICI Prudential Life Insurance reported a 56 per cent growth in premium in the half year ended September 30, 2008. The premium rose to Rs 6,726 crore from Rs 4,311 crore in the corresponding period last year.The insurance firm wrote 1,285,000 policies at a sum of Rs 1,82,427 crore in the period from April to September 2008 as against 1,099,000 policies in the same period last year, a growth of 17 per cent. Renewal premium rose significantly by 90 per cent to 3,423 crore.

Tides of 7.09.2008

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The Israeli Cabinet on Sunday discussed an initiative proposing voluntary evacuation of and compensation for settlers living in West Bank under any future peace agreement with Palestinians, even as...'No-frill' bank accounts cross 1 cr-mark
UTVi News - 2:28 hr ago
MUMBAI: 'No frill' accounts, which brought banking to the doorsteps of poor, has crossed the one crore-mark, according to latest figures made available by the Reserve Bank.

Tides of 6.09.2008

Union Bank launches Gift, Payroll cards
State-owned Union Bank of India today launched two prepaid cards - Gift and Payroll.
Text book independence for RBI is dangerous: Reddy
The outgoing RBI governor Yana Venugopal Reddy today cautioned that text book independence for the central bank is dangerous in the Indian context.
US Dollar sharply dearer against rupee
The U.S. Dollar sharply dearer against the rupee at Rs.44.64/65 per dollar but the Pound Sterling turned lower to Rs.78.64/66 per pound at the interbank Foreign Exchange (Forex) market here today.
CS Bank launches 'unique' gift card
With the festival season round the corner, Kerala based private Catholic Syrian Bank launched a unique user friendly Gift card 'CSB Uaphaar' here.
ING Vysya Bank gets RBI nod for expansion
Private sector bank ING Vysya Bank has received the approval from the Reserve Bank of India (RBI) for opening 56 new branches and 100 ATMs across the country during the current fiscal.
Subbarao takes over as RBI Governor
Duvvuri Subbarao today took charge as the new RBI Governor and said his immediate priority would be to contain inflation and pursue financial sector reforms.
D Subbarao takes charge as Reserve Bank Governor.
Priority is to manage inflation, anchor inflationary expectations: Subbarao.
Banks need to raise Rs 5,70,000 cr
The Reserve Bank report on Currency and Finance has projected that banks in India will need to raise a whopping Rs 5,70,000 crore over a five year period starting 2007-08 to maintain capital adequacy of 12 per cent.
'No M&A games between big banks'
Reserve Bank said that consolidation in the system should be among smaller and weaker banks as mergers among bigger players could undermine competition.
Rupee steady at 44.36/37 a dollar in early trade
The Indian rupee traded around its last closing levels after opening weak against the greenback in early trade today on some dollar selling amid a sharp fall in Asian equity markets.
Rupee recovers by eight paise to 44.35/36 a dollar
Snapping its four-day falling streak, the Indian rupee today gained eight paise at 44.35/36 against the US currency on dollar selling by banks amid sluggish equity markets.
'Pay windfall, crude, loan waiver may hurt'
The Reserve Bank of India (RBI) today warned that finances of the Central Government may come under pressure this fiscal due to implementation of recommendations of the Sixth Pay Commission, higher oil prices, fertiliser subsidies and farm-loan waiver.
RBI hints at continuing with hawkish monetary policy
Reserve Bank today indicated that there would be no softening of its hawkish monetary stance to contain inflation, which is 12.34 per cent, as volatile food and energy prices remained a challenge.
Prepare for full float of rupee: RBI
Reserve Bank of India today said Indian banks should gear themselves to face the risks of full float of rupee which is expected to happen by 2011.
Stanchart gets spooked by defaulters
Foreign banking major, Standard Chartered Bank, today said it has decided to be 'selective' in choosing its customers in the face of rising defaults in the country's retail banking sector.
Manappuram to receive Rs 108 cr capital infusion
The Kerala-based NBFC Manappuram Group of Companies will receive fresh capital infusion of Rs 108 crore from UK and US based private equity firm, which will be used for expansion purposes to add about 200 more branches this year, a top company official said.
Syndicate Bank hikes term deposit rates
Syndicate Bank has revised the rates of interest upwards on domestic term deposits for the tenor 180 days to less than two years from tomorrow.
Exporters were aware of risks: Bankers
Amid allegations by exporters that some banks "trapped" them into buying forex derivatives that led to huge losses, bankers said investors were fully aware of the risks.
HDFC Bank customers suffer ATM, Net crash
Private sector lender, HDFC Bank on Wednesday said it has restored operations in its ATM, Internet Banking divisions that were disrupted on Tuesday due to a technical snag.
Rupee eases by two paise against dollar
The Indian rupee today moved down by two paise to 44.45/46, against the greenback due to fall in equity markets amid dollar buying by some banks.
'Banks mis-selling to exporters'
Small and medium exporters today charged some leading banks with "trapping" them into buying forex derivatives and pushing them into losses of around Rs 2,000 crore on mark-to-market basis and asked the Government and RBI to intervene in the matter.

Tides of 15.08.2008

1 A resolution of Lakshmi Vilas Bank to raise funds through issue of shares to qualified institutions was passed by shareholders on Thursday at the annual general meeting, after the management agreed to modify the resolution.Sources said that a number of shareholders spoke in opposition, but voted for it after the management modified the resolution to the effect that the shares will be sold at a price not less than 2.5 times the book value at the time of placement of shares.Lakshmi Vilas Bank’s book value today stands at around Rs 85. At this level then, the shares cannot be placed at Rs 212.50 a share. On the National Stock Exchange, the bank’s shares closed today at Rs 94, less than Rs 0.45 than the previous close.The Bank’s Managing Director, Mr V. S. Reddy, told Business Line today that the management decided to modify the resolution to allay fears that the shares would be given away at a low price.

2. Karur Vysya Bank has effected an upward revision of 50 basis points on the rates offered on term deposits in time buckets ranging from 181 days to 3 years, from August 11. The interest on deposits for periods from 181 days but less than 1 year has been hiked by 50 basis points to 8.50 per cent and deposits in the one to two year time period by 25 bps to 9.75 per cent (9.50 per cent) and deposits maturing beyond 2 years and inclusive of 3 years would earn 10 per cent (9.75 per cent). It has also hiked its benchmark prime lending rate to 15.25 per cent with immediate effect..

3.The Finance Minister, Mr P. Chidambaram, on Wednesday said that Central public sector enterprises (CPSEs) appear to be violating Government departmental guidelines on placement of funds with banks.“They (CPSEs) are continuing to call for competitive bids… nor are they observing the guidelines that 60 per cent of public sector companies’ monies should be kept with public sector banks. I intend to take up this matter with the Department of Public Enterprises (DPE)”, Mr Chidambaram told reporters after a meeting with the chief executives of public sector banks here today.

4. ith certificates of deposit (CD) headed to breach the 11-per cent mark on the back of tight liquidity, banks have started waiving penalties for loan prepayments.Prepayment penalties were mostly levied by the domestic private sector and foreign banks. The penalties ranged anywhere between one and three per cent of the outstanding loan principal amount. Public sector banks have long done way with the prepayment charges. But private sector banks have now followed suit.ING -Vysya Bank sources said, “We have already done away with penalties on partial prepayments.”Banks typically resisted prepayments when interest rates were low and liquidity was in surplus.Bankers said that the move was influenced by tight liquidity conditions and soaring costs of working funds.The Finance Minister also plans to talk to the Minister concerned (Ministry of Heavy Industries) and call a meeting of CPSEs to urge them to desist from such an unhealthy practice.

5.The recent appreciation of the euro against the Indian rupee has underlined a point that most corporate CFOs intuitively know, but apparently do not always play by: there is a need to be well hedged.Last year, taking a call on the rupee was a one-way bet. Those who had to receive dollar – such as exporters – were battered, while those who had to make payments in the currency were thrilled. The rupee was going down slightly against the euro, and suggestions about shifting to euro receivables were commonplace.Now, the complete reversal of the trend in the last few weeks has turned the spotlight on the need to manage currencies better.

6. Bank unions are planning a one-day strike on August 20 to protest the merger of public sector banks, even as the final Government order on merger of State Bank of Saurashtra with State Bank of India is expected any time now.A union official said three bank unions — All India Bank Officers Association (AIBOA), All India Bank Employees Association (AIBEA) and the Bank Employees Federation of India (BEFI) will join the strike. The other six bank unions have decided not to join the strike and are adopting a wait and watch policy. The merger of State Bank of Saurashtra with SBI is only a prelude for things to come, with the Government looking at privatisation.

.7. HSBC would like to hold on to its stake in Indian private sector lender Axis Bank in the short-term, its India head said on Wednesday.Naina Lal Kidwai, HSBC's country head, said it did not make sense to sell the shares after a fall in the stock's price. Axis Bank shares are down more than 20 percent in 2008.

8. According to research by Seclore Technology, a data security firm that developed the Filesecure information protection software, 80 per cent of consumers’ personal information lies in unprotected files.This lack of security means pesky telemarketers could get hold of your personal information and phone numbers easily, terror groups could use your name and details to send threats, and corporate rivals could get hold of soft copies of your company letterhead to sabotage your operations and ruin your name.

9.State Bank of India (SBI) has launched its first debit card in Canada to raise its client profile in Toronto.SBI is also looking at 84 locations globally to increase its association with international business, chairman OP Bhatt said Wednesday while launching the card in Toronto.With seven branches across Canada, the State Bank of India-Canada (SBIC) - SBI's 100 per cent-owned subsidiary - claims to have captured 65 per cent of the trade conducted between that country and India.

10. A working group set up by the Reserve Bank of India has suggested that all the regional rural banks (RRBs) should move to the core banking platform by September 2011. This will help them undertake 90 per cent of their business on the platform.The cost of moving RRBs to core banking services (CBS) is estimated at Rs 730.78 crore. All RRBs are likely to get financial help but sponsor banks may have to contribute 25 per cent of the cost.

Tides of 11.08.2008

1. Rising bond yields and more flexible regulations have paved the way for the return of foreign institutional investors (FIIs) to the Indian debt market. FIIs, who were nearly absent from the debt market for most part of the year, have stepped up investments in July. According to SEBI data, FIIs invested around $897 million in the debt market in July, while in March, April, May and June, their investments have been negative. FIIs’ outflows between March and June were around $928 million.FIIs had, however, started off the year on a positive note by investing $484 million and $619 million in January and February, respectively. The FIIs are now seeing a significant arbitrage opportunity in debt investment.

2. Max New York Life Insurance plans to expand its distribution network by opening more than 250 new offices every year for the next three to four years and increasing the number of agent advisors from the current 46,800 to 3 lakh. The growth in agency distribution will be complemented by strong growth in partnership distribution. The capital base of the company is expected to expand to Rs 3,600 crore from the current equity base of Rs 1,232 crore. The company has clocked Rs 2,100 crore in collected premium for the January-July 2008 period, recording a growth of 81 per cent over the similar period last year.

3. The Bombay Stock Exchange (BSE) has applied to capital market regulator SEBI for setting up a currency derivative segment. The Reserve Bank of India and SEBI issued the final guidelines for launch of currency derivatives last week. Currency derivatives or currency futures are standardised foreign exchange derivative contracts traded on a stock exchange to buy or sell one currency against another on a specified future date, at a price specified on the date of contract, but does not include a forward contract. The Exchange Traded Currency Futures (ETCF) contracts facilitate increased transparency, efficient price discovery as well as reduced transaction costs. It also enables better counterparty credit risk management, wider participation. “BSE has applied to SEBI for setting up a Currency Derivatives Segment in line with the recommendations laid down in the Report of the RBI-SEBI Standing Technical Committee on Exchange Traded Currency Futures, released by RBI & SEBI on May 29, 2008,” said a BSE release

4. Higher risk weight attached to home loans under Basel II norms could discourage banks from pursuing aggressive lending policies, according to a recent report released by Fitch Ratings.
Risk weight on housing loans is based on the loan/value ratio (LTV) and could increase from 50-75 per cent to 100 per cent for LTVs above 75 per cent as per the Basel II norms. LTV is the percentage of the loan against the value of the house. The Basel II guidelines do not specify whether the LTV calculations should be done on an ongoing basis or at the point of disbursing the loan. The report suggests that the LTV calculations should be done on an ongoing basis, especially during periods of falling prices. According to the report, the differential risk weighting on different asset classes under Basel II could help guide the proportion and direction of bank lending, such as lending to higher rated corporates or hedging exposures to small-scale industries with permitted collaterals and guarantees.

5. Lakshmi Vilas Bank (LVB) expects 50 per cent growth in credit, the bank’s Managing Director, Mr V.S. Reddy, told Business Line today.Mr Reddy said the bank’s advances portfolio stood at Rs 3,900 crore at the end of last year. LVB intends to grow this book to Rs 6,000 crore in the current year, he said.Asked if this rapid scale-up might not affect the quality of assets, Mr Reddy replied in the negative. He said the bank would focus on corporate accounts, where the bank could lend at rates between 12 and 13 per cent and secure a reasonable margin.He said the average yield on advances is expected to grow from 11.1 per cent to 11.8 per cent this year.

6. Punjab & Sind Bank (PSB) may soon be able to tap the capital market through an initial public offering (IPO) at a reasonable premium, with the Union Cabinet on Friday giving its nod for restructuring its equity capital. The additional capital, after the equity rejig, would help the bank expand its business in compliance with Basel-II requirements and also improve its financial position. PSB is entirely owned by the Union Government.

7. Even as the Government is gearing up to disburse the first tranche of farm loan reimbursement by September 30, banks are facing a new problem, which could delay the entire process.Under the current guidelines, banks are not allowed to get any reimbursement until the final claims list is audited by a central statutory auditor. But the fees for the statutory auditors are huge and banks will have to pay before they get the money from the Government. And the audit may also take time, said a banker.The Indian Banks’ Association has taken up the issue with the Government as well as the Reserve Bank of India after it was discussed at its management committee meeting on July 29, said an official from IBA.ccording to the RBI guidelines, banks have to get 20 per cent of the accounts audited by the central statutory auditors, in order to get the reimbursement. However, the RBI guidelines do not make any mention of auditors’ fees. According to an official from a leading public sector bank, some auditors are asking for fees as high as Rs 15-20 per account, which could run into large amounts for some banks.

8. The foreign exchange reserves fell by $1.13 billion to touch $305.474 billion for the week ended August 1, according to figures released by Reserve Bank of India’s Weekly Statistical Supplement. This is the third consecutive week that forex reserves have fallen. For the week ended July 25, the reserves had fallen by $504 million to $306.603 billion. In the week under review, foreign currency assets decreased by $1.65 billion to $295.216 billion. Foreign currency assets expressed in dollar terms include the effect of appreciation or depreciation of non-US currencies. A forex dealer attributed the decline in the reserves to depreciation in the euro and pound, leading to a revaluation effect.Gold increased by $527 million to $9.735 billion, while SDRs remained unchanged at $11 million. The reserve position in the IMF fell by $3 million to $512 million.

9. An RBI technical committee has suggested waiver of Securities Transaction Tax (STT) for trades in Interest Rate Futures. The committee, in its final report released on Friday, said to ensure symmetry between cash market in government securities and interest rate futures, as also imparting liquidity to the market, deals in interest rate futures be exempted from STT.
The committee has recommended that banks be permitted to take trading positions in interest rate futures, subjects to prudential regulations, including capital requirements. The committee also suggested that FIIs may be allowed to take long positions in the interest rate futures market, subject to the condition that the total gross exposure in the cash and the futures market does not exceed the extant maximum permissible cash market exposure limit.

10. Dr K. Ramakrishnan, who retired as Chairman and Managing Director of Andhra Bank, took over as the Chief Executive of Indian Banks’ Association on August 4, said a press release issued by the association