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Major PSU banks lower lending rates
December 22, 2008: Following State Bank of India (SBI) decision to cut the prime lending
rates (PLR), major public sector banks like Bank of India, Bank of Baroda and Canara Bank have decided to lower their PLR.
These three banks have decided to cut PLR to 12.5% from 13.25%. The new lending rates will be effective from January 1, 09. Banks will also lower deposits rates from January by 50-100 basis point. However, in due course they will decided the extent of rate cut on deposits. On Saturday, SBI lowered its PLR to 12.25%, which is the lowest PLR in the industry. Meanwhile, private banks are still charging as high as 15-17% to their prime borrowers.
Source: The Economic Times
Govt banks offer special rates on some home loans
MUMBAI, December 15, 2008 (Reuters): Indian state-run banks will offer special rates on
some loans to home buyers and small businesses, as part of a
government- led initiative to boost economic growth and shore up confidence amid a global
liquidity crisis.
Government-owned banks will offer home loans up to 500,000 rupees at 8.5 percent
and between 500,000 to 2 million rupees at 9.25 percent, O.P. Bhatt, chairman of
State Bank of India, said at a conference held by the Indian Banks Association.
The new home loan rates, part of a move to stimulate demand in the affordable
housing segment, will be effective until June 30, 2009. Currently, loans in that
category cost borrowers more than 10 percent.The banks will take a 10 percent margin on home loans up to 500,000 rupees and
15 percent margin on home loans up to 2 million rupees. They expect to disburse 150 billion to 200 billion rupees under the special home
loan package by June 30, Bhatt said. The state run banks have also cut rates to micro businesses by 100 basis points,
he added.
Negative industrial growth in 15 years
NEW DELHI, December 13, 2008: After a gap of 15 years, the country’s industrial growth has
slipped into negative territory with a 0.4 per cent year-on-year decline in October 2008. This clearly reflects the deepening impact of the global economic downturn. Such a grim scenario prevailed in April 1993. The figure, contained in the Index of Industrial Production (IIP) data released on Friday, marks a sharp slump from the robust 12.2 per cent growth recorded in October last year. In September 2008, it was 5.45 per cent.
With over 12 per cent drop in exports in October, a deceleration in industrial growth during the month was expected. But what took the policymakers by surprise was the bigger than expected decline. “These figures are more disappointing than what we expected,” Prime Minister’s Economic Advisory Council chairman Suresh Tendulkar said.
Source: The Hindu
Package aims to revive various crucial sectors
NEW DELHI, December 08, 2008: Unveiling the much-awaited stimulus package to shore up various sectors of the economy from the global downturn, the
government on Sunday effected an across-the-board 4 per cent cut in Cenvat to bring down the prices of cars, cement, textiles and other products, and earmarked an additional
Rs. 20,000 crore for infrastructure, industry and export
sectors for the current fiscal.
In what may be dubbed as a mini-budget of sorts to lessen the impact of the global slowdown and recession in the West on the Indian economy, the package, while entailing a revenue loss of Rs 8,700 crore in the remaining four months of 2008-09, seeks to revive various crucial sectors such as housing, exports, automobile, textiles and small and medium enterprises
(SMEs). In an all-encompassing measure, the Cenvat on all products — barring non-petroleum goods — have been reduced from 14, 12 and 8 per cent to 10, eight and 4 per cent for various
categories.
Full exemption from basic customs duty has been effected on naphtha to provide relief to the power sector. While the export duty on iron ore fines has been
withdrawn, the levy on export of iron lumps has been cut from 15 to 5 per cent. Apparently, the package, drawn up at the instance of Prime Minister Manmohan Singh, who also holds the Finance portfolio, seeks to boost power, exports, housing, auto, SMEs and infrastructure sectors through additional funding.
The 10-point package, with significant incentives for the sectors affected
by the slowdown, has also permitted India Infrastructure Finance Company Ltd. to raise Rs. 10,000 crore through tax-free bonds by March as part of the exercise to support the Rs. 1,00,000-crore highways development
programme.
Private
PFs get nod to invest 15% in stocks
New Delhi, August 14, 2008: Now private PFs can
invest 15% of funds in stocks. Earlier limit was 5%. Funds
can put in 40% of funds in corporate debt paper while the
earlier limit was 10%. Funds can also invest in rupee bonds
issued by multilateral agencies. Invest in term deposit receipts
of not less than one-year duration issued by commercial banks
allowed. Debit instrument can be rated by just one credit rating
agency.
SBI, three others
banks raise rates from July 1
NEW DELHI, July 01, 2008: Three banks, State Bank of India (SBI), ICICI Bank, Indian Overseas Bank, and a housing finance major, HDFC, have increased their lending and deposit rates. The revised rates take effect from July 1.
Home and auto financing loans from State Bank of India (SBI) are set to cost more as the bank has decided to raise its rate of interest by 50 basis points on all credit packages linked to prime lending rates (PLR).
Speaking at a function on Monday at Ghaziabad near here, SBI Chairman-cum-Managing Director O. P. Bhatt revealed that the interest rate on all loans, including home and auto loans, which are linked to the PLR would be higher by 0.5 percentage point. The revision in interest rates on loans, as a pass-through to borrowers, has come about following the hike in SBI’s PLR from 12.25 per cent to 12.75 per cent last week. The bank had already increased the interest rate on fixed deposits by up to 75 basis points which were to be effective from June 30, as announced earlier.
SBI & Union Bank take lead, up PLR by 50 bps
MUMBAI, June 27, 2008: The country’s largest bank, State Bank of India (SBI), and Union Bank have taken the lead among PSU banks to raise lending rates by 50 basis points following the hike in repo rate and cash reserve ratio. SBI has increased its prime lending rate (PLR) to 12.75% from Friday while Union Bank has raised its rate to 13.25% from July 1. Union Bank on Thursday also raised deposit rates by 25-100 bps.
SBI officials said they do not plan to hike deposit rates at the moment since rates were raised a month ago. “But we don’t have a closed mind. If the need arises, we may revise rates,” an official
said. Other banks may also be preparing for the inevitable. The asset liability committee of Punjab National Bank is set to meet on Friday, while the panels of Bank of India and Kotak Mahindra Bank will meet on Monday.
Canara Bank on Thursday said it would examine market conditions before taking a call on revising interest rates.
Taking a cue from SBI, small and mid-sized banks are expected to increase lending rates within a week.
Sources said most banks are likely to raise the lending rates by 50 bps. Among bigger banks, Bank of India, Bank of Baroda and Canara Bank’s PLR stands at 12.75%, while PNB’s rate is
12.5%.
Source: The Economic Times
Indian rupee continues to slide
June 23, 2008: The Indian rupee has continued to slide in value against the US dollar amid concerns that high oil prices will stoke inflation in the economy. The Indian currency is down 8% against the dollar this year as the soaring cost of oil has eaten into household budgets and hit the
trade balance.
Wholesale prices in India, which imports 75% of its oil, are rising at their sharpest rate in 13 years.
One dollar was worth 42.972 rupees on Monday, up from 42.92. Asian currencies fell across the board on Monday after global oil prices showed no signs of retreating, despite a pledge by Saudi Arabia to increase output again if necessary. India's economy, which has enjoyed exceptional growth in recent years, is vulnerable to the soaring cost of the commodity because of
its dependence on imported oil.
Hefty government subsidies designed to keep fuel prices down have hit the public finances, while the higher cost of importing oil has hurt India's balance of payments. Finance Minister Palaniappan Chidambaram recently admitted that there were more "difficult times" ahead for the economy.
The Reserve Bank of India raised its key lending rate by a quarter point to 8% earlier this month and officials have indicated that a further increase could be imminent.
- BBC
Inflation zooms to 13-year high of 11.05%
NEW DELHI, June 20, 2008: Inflation on Friday shot up to a 13-year high of 11.05 per cent fuelled by rise in prices of petrol, diesel and cooking gas, giving no relief to the government from the
spiralling prices in an election year. The rise in petrol, diesel and cooking gas prices announced by the government on June 4 put the pressure on price line pushing the inflation by week ending June 7, up from 8.75 per cent in the preceding week.
Within minutes of the release of the government data, sensitive BSE index of stock markets tanked about 350 points, reflecting the nervousness of the investors about the efficacy of the measures being taken by the Finance Ministry and the Reserve Bank of India.
Besides fuel prices, rise in prices of food products particularly edible oil and manufactured goods added to the pressure on price line and woes of the government.
Previous high inflation of 11.11 per cent was witnessed on May 6, 1995.
Leading economists and analysts predicted that price pressures would prompt the Reserve Bank of India to further tighten the monetary policy, possibly by making short term lending to banks costlier. This could further lead to increase in interest rates for cars, homes and consumer finance, economists said and feared that present situation could also force a hike in lending rates for the industry
and many banks are already contemplating hiking the prime lending rate.
"The high inflation may force the RBI to increase the repo rate (short term lending rate to banks) by up to half a per cent,"
Principal Economist of rating agency CRISIL D K Joshi said and added that unless fuel prices are controlled the prices would be a major challenge.
Source: The Times of India |
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Banks hike FD rates to cope with high inflation
NEW DELHI, June 18, 2008: After increasing the lending rates, banks have started increasing deposit rates. The deposit rates may be revised upwards further, if inflation continues to rise. High rate of inflation affects the net return of a depositor. With inflation at 8.75%, net return to a depositor has already been reduced substantially. It is believed that if inflation persists at the current rate, banks will have to revise both the lending as well as deposits rates upwards again.
After SBI, which had increased the deposits rates last month, Oriental Bank of Commerce, Yes Bank and Bank of India have increased deposits rates by half a percentage point to one
percentage point. Oriental Bank of Commerce has raised the rates for its special deposit scheme Asha Kiran (FDs for 400 days) to 9.75% for senior citizens.
Recently, Reserve Bank of India had hiked the overnight lending rates for banks by 0.25
percentage points. A senior banker said this has led to rise in both the deposits as well as lending rates. If the inflation continue to rise and crosses 10% mark, there will be another bout of increase in the interest rates in the country.
Source: The Times of India
Banks urged to support farm growth
KOLKATA, June 16, 2008: Chairman and managing director of United Bank of India today called for a greater role of banks to support the agricultural sector of the country. Mr Gupta was speaking at a banking conclave organised by Ficci here today. He said there was a large section of rural populace which were depending upon unorganised sector for financing.
Referring to an approach paper by an IBA sub-committee on 'flow of credit to agricultural sector' he said that bank finance to agriculture should cover the needs of all types of farmers. He said: "About 40 per cent of the farming community in the country falls into the category of tenant farmers, share croppers and agricultural labourers who were not getting adequate credit". The share of agriculture in the overall GDP has seen a sharp decline from 31 per cent in 1990 to 17.5 per cent in 2007-08.
The growth rate of agriculture was 5.9 per cent in 2005-06, which has declined to 2.6 per cent in 2007-08 and the general feeling is that if the country wants to clock a double digit GDP growth the
agricultural growth has to be improved to at least four per cent. The theme of the fifth annual banking conclave is 'Towards sustainable economic growth: Evolving strategies of Indian banks'.
Source: Statesman
Ten percent rise in petroleum products
NEW DELHI, June 4, 2008: The ten percent rise in petroleum products on Wednesday has come as a rude shock for the man on the street, who feels cheated and stunned by the rise which one considers more than what was expected.
Be it an auto-rickshaw driver, a shopkeeper, a housewife, a student or a government official, all have told IANS in unison that although they were expecting a hike in the fuel prices and cooking gas, the 10 percent rise was too much to handle for the common man. Petrol and diesel will now respectively cost Rs 5 and Rs 3 per litre more to the consumers, whereas LPG cylinder will cost Rs 50 more. Normal unleaded petrol is now expected to cost Rs 50.52 per litre in the national capital and Rs 55.51 in Mumbai, while diesel is expected to retail at Rs 34.76 and Rs 39.08, respectively, in the two metros.
With the rise in fuel prices, the price of all essential commodities will automatically increase. The UPA government has completely failed to understand the needs of the common man. The
shopkeepers across the capital city are apprehensive that the rise will have an immediate effect on their business.
- IANS
SBI employees call for nationwide strike on June 6
Mumbai, May 24, 2008 (PTI): The country's largest public sector lender the State Bank of India's employees on Friday they would hold a one-day nationwide strike on June 6 to protest against the bank's management policies.
The strike would be observed to protest against the SBI management's policies on various issues including that of the pension scheme and Indian Banks Association's reluctance to take forward the employees' demands, an union official said. "We will hold a one-day nationwide token strike on June 6. The
IBA, despite having signed an agreement on various issues three months back, has not taken any significant steps to find solutions to the employees' problems," All India State Bank Officer's Federation's General Secretary G D Nadaf told PTI here. Apart from the pension scheme, other demands include recruitment of officers, regulated working hours for officers and termination of staff-outsourcing, Nadaf said.
- PTI
ABN Amro rebuilds India M&A team after mass exodus
MUMBAI, May 20, 2008: After losing most of its Indian mergers and acquisition (M&A) team to rivals in recent months, ABN Amro is bringing in managers from its global business. The Dutch bank is now looking at aggressively hiring for its various divisions in the wholesale banking side. A consortium led by RBS, along with Fortis and Santander, had taken over ABN Amro for e70 billion last year. Post-takeover, the Dutch bank has been losing people globally.
The bank has brought in Manoj S Agarwal from Hong Kong as head of global corporate finance, India. He will replace Frank Hancock who is joining Barclays Capital (India) as managing director and head of advisory for India. Mr Agarwal is currently based in Hong Kong and is responsible for financial sponsors-led M&A advisory efforts in Asia.
Source: Economic Times
Indian cash rates rise as surplus funds shrink
MUMBAI, May 12, 2008 (Reuters): Indian call money rates rose to a one-month high on
Monday after an increase in banks' reserve requirements kicked in over the
weekend and banks paid for their purchases at Friday's bond auction, draining
surplus cash. The central bank sold 100 billion rupees worth bonds on Friday and investors
made payments for the bonds on Monday.
"The CRR took effect on Saturday and outflows towards the Friday's bond auctions
was today. So with the two combined, the market was slightly short on
liquidity," a dealer with a private bank said. Call money rates
ended up at 6.40/6.50 percent, levels it last tested in early April, according to Reuters data. Call rates closed Friday at 5.75/6.0
percent.
The central bank has raised banks' cash reserve ratio (CRR) or the amount of
funds banks have to keep as deposit with it by 75 basis points to 8.25 percent
since mid-April. The second stage of the rise by 25 basis points came into
effect on Saturday. The third increase will come into effect on May 24 and each increase is draining
90 billion rupees from the banking system.
Overnight rates usually stay around 6 percent, the reverse repo rate of the
central bank, when cash conditions are adequate. Volume in the call money market was 147.42 billion rupees and collateralised
borrowing and lending obligations (CBLO), a secured form of money market
lending, was 537.12 billion rupees, data from the Clearing Corp of India
(CCIL) showed.
The weighted average rate in the call money market was 6.49 percent, while CBLO
was at 6.23 percent. CBLO rates touched an intraday high of 6.75 percent, the
data showed.
Source: Reuters
Inflation
at 7.57% ,a 42- month high
New Delhi, May 02, 2008: Inflation rose yet again-
to a scorching 7.57% , registering a 42-month high. The last
time inflation had touched a higher a higher level was in
November 2004 , when it had reached 7.68%. The commodity
that moved the price this week are milk (1%), rice (1%), iron
and steel (1.1%).
It is expected that inflation won't come down below
7% for next couple of months as prices are not showing signs of
cooling off in the international market.
RBI governor hikes
CRR by 25 basis points
Mumbai, April 29,
2008: RBI governor Yoga Venugopal Reddy hikes CRR by 25 basis
points, but leaves rates unchanged. This decision of governor
will not only come as a relief to home loan borrowers but also go down
well with the government. A rate hike could have slowed down
growth, made life difficult for the borrowers and even pushed up
money supply through more NRI remittance and migration of saving
from post office to banks. Instead of hiking rates to discourage
spending, Mr Readdy mopped of a little more money from the
banking system to his war against inflation.
Finance Minister P Chidambaram again targets steel, cement
cartel
New Delhi, April 22, 2008: Finance Minister P Chidambaram on Tuesday again targeted the cement
manufacturers and steel producers saying they were acting like a cartel and
warned that the government was looking at legal and administrative measures to
deal with them to contain runaway inflation. "It is my view that cement manufactuers and to some extent steel producers are
behaving like a cartel," he said replying to supplementaries during the Question
Hour in Rajya Sabha. MRTPC is conducting an inquiry into the allegations of cartelisation, he said.
"We are looking at legal and administrative provisons that are available to the
government." Besides, ministeries of steel and industry were talking to the industry.
The weekly inflation rate of Wholesale Price Index (WPI) stood at 6.7 per cent
as on March 15, 2008 and reached 7.4 per cent on March 29. However, it has come
down to 7.1 per cent as on April 5. "Containment of inflation remains high on the agenda of the government," he
said. "As and when necessary, more fiscal measures will be taken. We have taken
a set of fiscal measures and some more fiscal mesaures are being contemplated."
The Reserve Bank of India had last week hiked the percentage of money the banks
are supposed to keep idle (Cash Reserve Ratio) by 50 basis points. Its monetary
policy review is due on April 29 and the government will wait and see the steps
taken by RBI, he said.
Asked about the reported differences among the ministry of finance and other
ministeries including commerce and industry, he said: "There is no difference of
opinion. When 3-4 ministers meet, we exchange views (on the issue)."
Chidambaram said anti-inflationary policies of the government include strict
fiscal discipline, rationalization of duties of essential items, effective
supply- demand management of essential commodities through liberal tariff and
trade policies and procurement through public sector agencies.
RBI in the Third Quarter Review of the Annual Policy Statement of 2007-08 has
mentioned that increase in international prices of oil, foodgrains and other
commodities are visibly reflecting the strains imposed by aggregate demand
conditions. The monetary policy of RBI, while being conducive to economic growth, has
attempted to contain inflationary expectations arising out of uncertainties in
domestic and international environment, he added.
Source: Press Trust Of India
State-run banks have to brace for fewer holidays
Mumbai March 25, 2008: The Sixth Pay Commission’s recommendations would have jolted many bankers recovering from Monday morning blues, which seemed worse today, thanks to a four-day weekend.
The move, if implemented, could change the way banks transact business. For starters, the loyal public sector bank customers could be the biggest gainers, with the Pay Commission recommending that government offices should stay closed only on the three national holidays –
Republic Day (January 26), Independence Day (August 15) and Gandhi Jayanti (October 2). All cheque clearances are expected to be faster and make money available in your accounts earlier than at present.
Banks are not governed by the list of gazette holidays put out by the Centre every year, but instead have to depend on state governments, which have powers under the Negotiable
Instruments Act to declare local holidays based on festivals and important regional events. But if
the Pay Commission move goes through, states would also have lesser leeway.
While this is good news for bank customers, many of whom, especially small businesses, have to plan in advance to deal with a spate of holidays, banks would be required to put in place a whole set of changes and add infrastructure to keep branches open on more days.
The biggest operational change is likely to come in the way banks undertake cash management operations. Bankers might not have to rack their brains to decide on the optimum amount of cash that needs to be stacked in their ATMs. But unlike what happens at present, if the pay panel’s recommendations are accepted, overnight call rates might not shoot up before long weekends.
Source: Business Standard
Global investment banks to invest $500mn in Unitech SPV
NEW DELHI, March 24, 2008: Private equity players Lehman Brothers and Deutsche Bank are set to make a combined investment of $500 million in an SPV floated by India’s second-most valued real estate
developer Unitech, according to a person close to the development.
The two PE players are learnt to be in advanced talks with Unitech to pick up a minority stake in the SPV formed to execute two commercial projects in Mumbai. The two projects, located in Santa Cruz, are likely to have a combined developable office space of 2 million sq ft. The deal is
likely to be closed in the next three weeks, according to a source. Unitech declined comment on the issue. Market volatility and the news that Unitech was putting off its QIP and REIT listing have hammered the company’s stock beyond recognition in the past few weeks. Unitech has lost almost half of its market cap since the beginning of the year. Its share closed at Rs 267 on Wednesday as against Rs 508 on January 1. It has shed 28% in a month’s time.
Source: The Economic Times
Banking system will not be constrained by
waiver
NEW DELHI, March 07, 2008: Finance minister P Chidambaram believes that the Rs
65,000 -crore farm waiver package will strengthen the banking system and that the central bank would back the government in implementing the scheme. The Reserve Bank of India (RBI) has already sought details from banks on such loans by March 14, 2008.
Briefing reporters after the RBI board meeting on Thursday, Mr Chidambaram said: “The RBI governor has told the board that the RBI is fully geared to support the government in implementing the scheme in a manner that the banking sector
will be strengthened, not weakened. The banking sector will be compensated in a way that the banks will not be constrained at all.”
“I explained debt-waiver and debt-relief scheme to the board members and since it was a closed-door
meeting, I took them through the contours of the package,” he said. Mr
Chidambaram reiterated Prime minister Manmohan Singh’s view that banks would be compensated as and when loans came due and the scheme would be funded through government revenue.
The governor said that the Reserve Bank would work closely with the government and the banks to ensure that the loan waiver scheme was implemented within the announced time-frame to serve the interest of the farmers. Steps would be taken to improve credit flow while subserving the interest of the banking system, he said in a statement issued here. The RBI has written to banks seeking details of farms loans given before March 31, 2007 and which had outstanding dues as on February 29, 2008. Banks are expected to file in these details by March 14, 2008.
The debt-relief package is expected to apply to farm loans made by many
state- owned banks up to March 31, 2007, and overdue on December 31. Farmers with up to 2 hectares of land would be eligible for a complete write-off of loans overdue on December 31, 2007, and which remained unpaid up to February 29.
Source: Economic Times |
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All ATM services to be free from April 2009
NEW DELHI, February 21, 2008: The levies of Rs 20 for using third-party ATMs to avail of services other than balance enquiry or cash withdrawals, are proposed to be eliminated from April next year, the central bank said.
At present, banks charge up to Rs 57 per transaction for using ATMs of other banks. While Rs 25-30 per cash withdrawal is the norm, a balance enquiry at an ATM other than your bank’s can cost Rs 10-15 every time you click on the button. On their part, banks pay between Rs 18 and Rs 31 to the other bank whose ATM was accessed by its account holder. |
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With the prospect of an easy revenue stream
vanishing, banks have come up with various arguments against RBI’s proposal. While some suggested a fixed number of free withdrawals during a quarter or a month — which could either be prescribed by Reserve Bank of India or left to individual banks — at least two players wanted nominal levies.
On its part, the industry lobby, Indian Banks Association, said that the availability of free ATM services could lead to an increase in the number of transactions and lower withdrawal amounts. So, it has
suggested, that there should be only two free monthly transactions. In the metros, it wants minimum withdrawal limit be hiked to Rs 500 besides capping the number of times you can check your account balance.
Source: The Economic Times
Investment in agri vital to India: World Bank
NEW DELHI, February 16,2008: Greater investment in agriculture in transforming economies like India is vital to the welfare of 600 million rural poor, mostly in Asia, says the latest World
Development Report (WDR) of the World Bank. Presenting the India highlights of the report here on Friday, WDR co-author Alain de Janvry said there was "much
mis-spending on agriculture" in India, with investments accounting for only 25 percent of public expenditure, while subsidies took up 75 percent.
WDR 2008 looks at agriculture after a gap of 25 years. The report, titled Agriculture for
Development, warns: "The international goal of halving extreme poverty and hunger by 2015 will not be reached unless neglect and under-investment in the agricultural and rural sectors over the past 20 years is reversed."
Talking about the large number of farmer suicides in India, de Janvry said the way out was crop insurance. Gulati said the recent cold wave in north India had ruined up to half the vegetable crop in Punjab, "but hardly any of the farmers have insurance". Ruing the neglect of agriculture by
policymakers around the world, de Janvry said, "Growth originating in agriculture is two-three times more effective for the poor than growth originating in non-agriculture."
One of the big changes in Indian agriculture, de Janvry pointed out, was the rise in the number of small farmers as landholdings were being fragmented all the time. "Rural households are being squeezed out of
land."
Bank of India cuts interest rates on retail loans
MUMBAI, February 11, 2008 (Reuters) - State-run Bank of India has reduced its interest rates on
retail loans by between 25 basis points and 250 basis points effective February
1, a senior official said on Monday. The rates on auto loans and personal loans have been reduced by 250 basis points
while the rates on home loans of up to 2 million rupees have been cut by 25
basis points, D. Krishnamurthy, general manager of credit at the bank said.
The revised rate for home loans up to 2 million rupees is 9.75 percent, he said.
The interest rates on educational loans have also been reduced by 100 basis
points, he added. Bank of India has left its prime lending rate, or the rate at which it lends to
its best borrowers, intact at 13.25 percent. Earlier on Monday, the country's top lender State Bank of India has cut its
prime lending rate by 25 basis points to 12.5 percent with effect from February
16.
State-run banks cut home loan rates
Mumbai/Kolkata February 06, 2008: Public sector lenders Canara Bank, Corporation Bank and
Allahabad Bank have decided to lower interest rates on housing loans, preferring to keep their prime lending rates
(PLRs) unchanged. K V Kamath, managing director and chief executive officer, ICICI Bank has indicated that the country’s second largest bank would review interest rates only in 2008-09. Canara Bank, which had reduced interest rates by 50 basis points on fresh home loans in October 2007, will cut floating interest rates by 25 basis points for new as well as existing
borrowers on February 7. The revised interest rates for housing loans up to Rs 20 lakh are
10 -10.5% and 10.25-10.75% for loans above Rs 20 lakh. The bank’s PLR stands at 13.25%.
Mangalore-based Corporation Bank has decided to lower interest rates on personal and home loans by 50 basis points and on loans to small enterprises by 25 basis points from February 15 for existing as well as new borrowers.
Kolkata-based Allahabad Bank has also cut interest rates only for new borrowers by 50-100 basis points on home loans, loans for consumer durables, car loans and education loans from February 10.
Meanwhile, UCO Bank will seek board approval on February
11 to revise its PLR by 25 basis points to 13.25% even as United Bank of India (UBI) has hinted at a possible rate cut.
In its third quarter review of the monetary policy, the Reserve Bank of India had placed the onus of reducing interest rates on banks. RBI observed that contrary to the comfortable liquidity situation, banks had not cut lending and deposit rates, which were at the elevated levels of the previous year.
Government raises FDI limit in 7 sectors
NEW DELHI,January 31,2008: The government on Wednesday announced further liberalisation of foreign direct investment (FDI) in seven key economic sectors, allowing 74% FDI in non-scheduled airlines, 49% foreign investment in commodity exchanges and up to 49% FDI in credit information companies (CICs).
The FDI review policy, which has been approved by the Cabinet, also increased the FDI equity cap from 26% to 49% (with prior FIPB approval) in petroleum refining by PSUs and allowed 100% FDI in titanium mining. It also proposes to give a boost to real estate by keeping investment by registered FIIs outside the purview of the three-year lock-in period under Press Note 2 (2005) applicable for FDI investments. “The general pattern of foreign investment would be FDI of 26% and FII of 23% in sectors where up to 49% FDI is allowed. However, different sectors may have different
combinations for FDI and FII investments,” information and broadcasting minister Priyaranjan Dasmunsi told reporters.
In case of aviation, he said, the FDI policy review has decided to continue with the existing FDI cap at 49% on the automatic route and 100% for NRIs, subject to no direct or indirect participation by foreign airlines in domestic scheduled passenger airlines.
Source: Economic Times
India to respond appropriately to US interest rate cut: FM
DAVOS, January 24, 2008: Five days ahead of the review of India's monetary policy, Finance Minister P Chidambaram on Thursday said New Delhi will respond to a hefty cut in the US interest rates to avert the resultant surge in foreign funds inflow. "We will respond (to the rate cut in US) through appropriate fiscal and monetary measures," he told reporters attending the World Economic Forum here.
The Reserve Bank of India is due to review its monetary policy stance on January 29. The
scheduled quarterly review comes on the heels of a surprise 75 basis points cut in interest rates by the US Federal Reserve on Tuesday. The US rate cut was part of efforts to stimulate
consumption to keep the world's largest economy from slipping into a recession - fears of which had led to a meltdown in the global equity markets.
"We are concerned that it (US Fed rate cut) would lead to high flow of capital to India. But government is not in favour of putting curbs on capital... we have taken, will take some measures to moderate the capital flow," Chidambaram said. He said despite fears of global recession, the Indian economy is set to grow in the range of 8.5 per cent to nine per cent. However, high interest rates may have an impact on the growth trajectory. "Our interest rates are set in order to contain
inflation, but it (high interest rate) is a dampener to growth," he added. "Fiscal measures would have to be announced in the budget and monetary measures have to be taken by the Reserve Bank," said
Chidambaram, who had earlier asked public sector banks back home to lower interest rates to spur consumption.
The rate cut, which has widened the difference between interest rates in the US and India, would trigger increased capital flows, besides lead to faster appreciation of rupee. The rupee has risen over 15 per cent vis-a-vis the greenback since October 2006, affecting Indian exports.
Source: Economic Times
FDI doubles contribution to total investments in India
NEW DELHI, January 07, 2008: Gradual delicensing of sectors and ease in doing
business for global companies has led to FDI more than doubling its share in the total investments in India between 2003-04 and 2006-07 with inflows recording a five-fold rise in the last three years. "As a percentage of total investment, this (share of foreign direct investment) has gone from 2.55 per cent in 2003-04 to 6.42 per cent in 2006-07," a year-end review of the Department of Industrial Policy and Promotion (DIPP) has showed.
It said after receiving FDI of 15.7 billion dollars in the last fiscal, an ambitious target of 30 billion dollars had been set for 2007-08. Till August this fiscal, inflows of 6.44 billion dollars were recorded with the maximum funds coming through tax haven Mauritius. Reflecting the growing interest of foreign investors into the country, share of FDI in India's Gross Domestic Product has also gone up from a mere 0.77 per cent to 2.31 per cent in the last financial year.
Bank unions call strike to oppose SBI arms merger
MUMBAI, January 03, 2007: Bank unions on Thursday called a nationwide strike on January 25 to protest the impending merger of State Bank of India's associate institutions with itself. The decision was taken in a joint meeting of various unions being held in Delhi on Thursday, All India
Bank Officers Confederation's (AIBOC) Joint General Secretary G D Nadaf told PTI.
Boards of SBI and its associate banks are meeting on January 25 to consider the merger of SBI's six associate banks with the parent bank. These associates include State Bank of Travancore, State Bank of
Mysore, State Bank of Bikaner and Jaipur, State Ba nk of Hyderabad, State Bank of
Indore, and State Bank of Patiala. The seventh associate, State Bank of Saurashtra, has already received the board nod and is awaiting the government's approval. The unions said after their
meeting that they would strike work on February 25 and 26 as the second phase of the agitation, would consider going on an indefinite strike in the third week of March if SBI goes ahead with the merger.
Apart from SBI unions, the representatives from United Forum of Bank Unions
(UFBU) and All India Bank Officer's Confederation (AIBOC) also attended the meeting, Mr Nadaf said. Unions also raised several other issues that include the long pending demands related to pension,
compassionate appointment and outsourcing in the banking industry, he said. - PTI
Key indices close at all-time high
MUMBAI, January 02, 2008: Short covering and renewed buying towards end of the session saw key indices close at all-time highs. Banking shares remained in the lime light while midcaps and smallcaps continued to rally. Bombay Stock Exchange’s Sensex closed at an all-time high of
20,465.30, up 164.59 points or 0.81 per cent. In the day, it touched an intra-day high of 20, 529.48 and low of 20,077.40. National Stock Exchange’s Nifty ended at 6179.40, up 35.05 points or 0.57 per cent. It hit an all-time high of 6197 and low of 6060.85 in the day.
Biggest Sensex gainers were Reliance Energy (up 4.09%), Tata Motors (4.06%), HDFC (3.81%), ICICI Bank (3.42%), Cipla (2.76%), Hindalco Industries (1.9%) and ITC (1.75%). Satyam Computer (down 1.59%), BHEL (1.33%), Hindustan Unilever (1.31%), Reliance Communications (1.06%), Wipro (0.88%) and HDFC Bank (0.86%) were the losers.
Finance
Minister asks banks to provide loans to urban poor
NEW DELHI, December 31, 2007: Finance Minister P Chidambaram today asked banks to provide loans to the urban poor, whose conditions are worse than their rural counterparts. "Urban poor are worse off than the rural poor. They may have slightly larger income, but on the parameters of space,
sanitation, drinking water, air, their conditions are much worse than the rural poor," Chidambaram said after inaugurating Indian Bank's ninth branch for micro-finance.
He asked banks to be more liberal while extending loans to urban poor for education, housing, consumer goods and medical needs, considering that their repayment record is much better than other categories of borrowers.
Indian Bank has financed 2.37 lakh self-help groups, covering 35 lakh women. The PSU bank is planning to open three more micro-finance branches in Bangalore, Pune, and
Bhubaneswar. Talking to reporters later, Chidambaram said his growth forecast for this fiscal remains unchanged at close to nine per cent.
Consolidation holds key to banking sector
growth
BANGALORE, Deceber 29, 2007: Union Finance Minister P Chidambaram on Saturday said consolidation holds the key for growth of the banking sector in the country and urged banks to embrace the "inevitable" change. "Consolidation has to happen in the banking sector. There is no choice, until external forces impose their choices upon you," he at a function organised to mark the opening of 1,000th branch of Vijaya Bank.
"As we go along we have to consolidate our gains both organically and inorganically,"
Chidambaram said. "The way to grow forward is consolidation," he said.
Another big issue facing the banking sector is retraining employees from becoming multi-skilled so as to deal with the challenges posed by technological changes, he said. "All will have to be
multi-skilled."
"Future organisations will be flat and driven by technology. Multi-skill will drive the banking sector," he said, pointing out that technology and "flat" organisation will result in breaking down of the traditional hierarchy of work division.
"Huge opportunities will open up for Indians", Chidambaram said, adding, the country would have to leverage its strengths, including its human
resources, to "dream big". Investment in human resource, the country's biggest strength, was of pivotal importance while preparing to take on the
challenges of the future, he said.
Though India did not lack in terms of quantity of human resources, the same could not be said of the quality, he opined. Investment in developing human resources was of key importance given the fact that HR could drive growth, he said. Later speaking to reporters on the government's decision to subscribe to a rights issue of SBI, he said "There is no cash outflow on the rights issue
subscription of SBI. That will be done by bonds and we will create a redemption fund.
India presence must to become global
banks
NEW DELHI, December 18, 2007: Banks aspiring to become global must have a presence in India and other emerging economies, who are set to become a major source of financial sector revenue and profit growth, according Ernst and Young. "In the near future, banks will not be able to say they are global unless they have a presence in China, India and a few other countries, because these emerging markets are going to be a major source of financial sector revenue and profit growth," the international consulting firm said in a report prepared jointly with UK-based research firm Oxford
Analytica.
The report, titled 'Strategic Business Risk 2008 - the Top 10 Risks for Business', noted that a late entry into these Asian markets would make it difficult for foreign banks to keep up with competition. For the Asian banks themselves, the report pointed out, one of the main threats is the rapid transformation from "government bureaucracies into corporate governance and transparency-driven
organisations". The report also noted emerging markets as one of the ten
strategic business risks for year 2008. Other risks included regulatory and compliance, global financial shocks, aging consumers and workforce, industry consolidation or transition, energy shocks, executing strategic transactions, cost inflation, radical greening and consumer demand shifts.
According to the report, regulatory and compliance risk has been considered as the "greatest strategic challenge facing leading global businesses in 2008". "This is being driven by an
escalating regulatory burden in many markets, as well as numerous compliance challenges as
companies extend their value chains well beyond Europe, North America, and the BRICs (Brazil, Russia, India and China)," it said.
Source: PTI
India had a liberal
approach towards foreign banks
MUMBAI, Nov 26 (Reuters) - India had a liberal
approach towards foreign banks and was more welcoming than other countries, a
deputy governor of the central bank said on Monday, pointing to lengthy delays
in local banks' getting U.S. approval.
Currently, 29 foreign banks in India have a network of 273 branches and 871
off-site automatic teller machines (ATMs) and there were no restrictions on the
scope of their operations, V. Leeladhar, one of the Reserve Bank of India's
(RBI) four deputy governors, said in a speech at a banking conference.
"(The) Indian regulatory regime is in fact more equitable and provides a far
more level playing field to the foreign banks, than in many other jurisdictions
in both developed and emerging economies," he said.
Prudential rules were the same as for local banks, he said, adding foreign banks
even enjoyed a lower priority-sector lending requirement of 32 percent of
adjusted bank credit against 40 percent for Indian banks.Foreign banks had 6.1 percent of deposits and 6.8 percent of advances in the
commercial banking system as at end-June, he said. Foreign banks dominated the off-balance sheet business with a market share of as
high as 72.7 percent, and they had 52 percent of total foreign exchange turnover
in the first half of 2007/08 (April-March) from 41 percent in 2005/06, he said.
Foreign banks also recorded a higher rate of return than local banks from local
operations. Net profit per branch for foreign banks in 2005/06 was 119.9 million
rupees ($30.3 million) compared to 3.3 million rupees for local banks.
While India was obliged to permit 12 licences to foreign banks each year under
its World Trade Organisation (WTO) commitments, Leeladhar said the RBI had in
authorised 75 branches between 2003 and October 2007. "Branch authorisation policy for the foreign banks in India may even be
described as quite generous, and not merely liberal," he said, but noted that
this was not always reciprocated.
Source: Reuters
More
Indian companies expected to invest in Hong Kong
Mumbai, November 4, 2007 (PTI): Eight Indian companies, primarily from the financial services, IT, retail and aviation sectors are expected to invest in Hong Kong next year, Invest Hong Kong's Associate Director-General Simon Galpin said. "We have talked to eight Indian companies from various sectors and they have agreed to invest in Hong Kong next year," he said here. Invest Hong Kong is a department of the Hong Kong Special Administrative Region and is the
government's arm charged with attracting foreign investment into the island.
Presently, nearly 20 prominent Indian firms, including Air India and State Bank of India (SBI), have investments in Hong Kong, he said. "Total trade between India and Hong Kong, which stood at USD 7.67-billion in 2006, is expected to go up this year with
new players increasingly showing interest to Invest in Hong Kong," Galpin said. Other Indian firms, who have operations in Hong Kong include ICICI Bank, Bank of Baroda, New India Assurance Company, HCL Technologies, Satyam Computers and Tata Consultancy Services.
.
According to Invest HK, FDI inflows into that country have tripled in the last three years, from USD 13.6-billion in 2003 to nearly USD 43-billion in 2006, while inflows in the first two quarters of this year are estimated to be around 27.1-billion. While India exported goods worth USD
4.72- billion to Hong Kong in 2006, primarily engineering goods, gems and jewellery, chemicals,
agricultural and petroleum products, total imports to India stood at USD 2.95-billion during the period, Galpin said.
"We have nearly 1,000 firms in Hong Kong operated by Indian businessmen in various sectors. We are trying to attract more Indian entrepreneurs into the country," he said. Indian banks
including Axis Bank, Allahabad Bank, Canara Bank and ICICI Bank have recently set-up their shops in Hong Kong, while Punjab National Bank is expected to open its branch on the island this month.
PSU banks to hire 10,000 employees shortly
NEW DELHI, November. 4, 2007: Amid growing competition from domestic and foreign players, country's state-run banks including the biggest lender,
SBI, are looking to beef up their head count by over 10,000 employees in the next few months. While State Bank of India and its associates alone account for over three-fourth of the planned hiring, others like Canara Bank, Union Bank of India, Andhra Bank and Bank of Baroda also have plans to expand their collective employee strength by about 2,000 employees.
SBI initiated the process to hire 3,000 people at officer levels last week, while in October it had started the procedure to recruit 2,500 customer relations
associates for its operations across the country. The bank is also in the process of appointing another 2,700 people at various positions for its associate banks. Earlier this year, SBI had recruited about 1,000 customer relationship executives on contractual basis.
Besides SBI, Canara Bank is also inviting applications for 298 positions across senior, middle and junior levels. The bank is looking to hire employees across operations ranging from risk analyst, legal functions, administration to information technology related positions. The registration process for the openings would continue till the third week of November, as per the information available on Canara Bank's website.
SBI, last week, said that it is looking for 3,000 marketing and recovery officers in the age group of 21-30 years. Preference would be given to the agriculture graduates, although graduates in other streams such as business administration and MBAs could also apply, SBI said on its website. Hiring is being done to
provide employees for 150 branches the bank is planning to open by next year, he added. In September, SBI had said it was looking to hire over 2,700 employees for its various associate banks such as State Banks of
Patiala, Hyderabad, Mysore, Indore and Travancore to name a few.
Source: Press Trust of India
Banks want freedom to fix deposit schemes
MUMBAI, November 1, 2007: Banks have sought greater leeway in structuring their deposit schemes after the banking regulator clamped down on the special deposits scheme which was being offered by several banks. At the customary meeting with Reserve Bank of India governor
YV Reddy on the day of the monetary policy, bank chiefs made a strong case for operational freedom in designing such schemes.
Bankers pointed out the five-year deposit scheme offered by banks under a scheme notified by the government, which offers income tax breaks, does not allow customers to withdraw prematurely before the maturity of the scheme. Recently, RBI restricted banks from stipulating a lock-in period on deposits and also directing them to pay interest on a proportionate basis if there is a premature withdrawal.
Over the last one year, several banks were offering higher rates on special deposit schemes which had a lock-in period while the regular deposits for the same tenure attracted a lower interest rate, but had the flexibility of premature withdrawals. Banks are offering interest rates in the range of 9-9.25% for 400-500 days while the regular scheme was priced at 8-8.25% for one year.
Besides, bankers have also asked RBI to charge the additional hike in the cash reserve ratio on incremental deposits. CRR is a portion of deposits that banks have to park with RBI. The central bank raised CRR by 50 bps to 7.5% which will be on the entire deposits base of a bank. A section of bankers has once again suggested to RBI that banks should be allowed to raise
long- term deposits which offer tax concessions so that they can fund infrastructure projects.
Source: Economic Times
Interest rates in
India would probably come down: ICICI Bank
BANGALORE, November 1,
2007 (Reuters): Interest rates in India would probably come down even after the central bank's announcement of an
increase in the cash reserve ratio (CRR) for banks earlier this week, the chief
executive of ICICI Bank said on Thursday. "There has been a hike in CRR. But I am not hearing any banker talk of
increasing rates," K.V. Kamath told reporters.
Reserve Bank Of India Lifts Cash Reserve Ratio
MUMBAI, October 30, 2007:
Reserve Bank of India on Tuesday lifted lenders’ required cash
reserve ratios by 50 basis points to 7.5% in a bid to siphon excess liquidity from the system, but it left key interest rates unchanged in its midterm policy review. “At the current juncture and looking ahead, on the domestic front, the biggest challenge for monetary policy is the
management of capital flows and the attendant implications for liquidity and overall stability,”
RBI
Governor Y. Venugopal Reddy said in a statement from Mumbai.
The hike in banks’ cash reserve ratio will take effect Nov. 10. The banks’ repo rate (lending rate) was unchanged at 7.75%, while the reverse
repo--borrowing--rate remained stable at 6%. Foreign investors have been net buyers of close to $19 billion in equities this year, taking the benchmark Sensitive index (Sensex) up about 40%. The surge of foreign money has increased upward pressure on the rupee, which has appreciated about 12% against the dollar this year. Last week, the securities markets regulatory authority curbed offshore instruments linked to derivatives in a move that is expected to temper inflows.
The Reserve Bank had tightened rates earlier in the year to control inflation, which came in at 3.07% for the second week of October, well below its annual target of 5%. The bank expects to meet its target for this year and has a medium-term objective of keeping inflation around 3%.
RBI
estimates for GDP growth for the fiscal year ending in March 2008 remain unchanged at 8.5%. Last year, the Indian economy clocked record growth rates of 9.4%.
Rupee up on flows, regulator meeting watched
MUMBAI, October 25, 2007 (Reuters):- The rupee climbed towards 9-˝ year peaks on
Thursday, boosted by capital inflows, and as investors mulled over the outcome
of the stock regulator's move to tighten rules for unregistered foreigners.
The partially convertible rupee ended at 39.55/56 per dollar, moving up from
Wednesday's finish of 39.58/59. It hit 39.27 earlier this month, its highest
since March 1998.
"There was strong two-way interest today, and the market is still digesting the
results of the SEBI meeting," said a dealer with a private bank, referring to
stock market watchdog Securities and Exchange Board of India. The regulator's board met on Thursday to consider proposals to tighten rules on
instruments used by unregistered foreign investors to buy local equities.
Overseas investor flows into India's fast-rising stock market have been a key
driver of the rupee, which is up about 12 percent this year. Gains in the rupee were capped by state-run banks who bought dollars, although
traders said it was hard to tell if the purchases were on behalf of oil
companies or the central bank.
The Reserve Bank of India (RBI) is widely seen as having actively tried to cap
the rupee's rise in recent weeks. When it intervenes, it does so through
state-run banks. Swiss bank UBS expects the central bank to continue intervening against the
rupee, and forecast the local unit should end the year at 39.
RBI Governor Y V Reddy concerns over suicides by debt-ridden
farmers
Press Trust of India / Washington October 18, 2007: Amid concerns over suicides by debt-ridden
farmers, RBI Governor Y V Reddy has said the problem "goes beyond credit", and blamed the
lack of risk mitigation mechanisms against natural calamities and other failures for the crises. Addressing a gathering at the Peterson Institute of International Economics, Reddy said shortage
of skilled manpower and absence of modern infrastructure were "the most critical barriers" to the India economy, which expanded by 9.4% last year, and called for urgent education reforms.
He said the issue of credit to the agricultural sector is a "very important one" but would have
to be pursued as a larger effort. "There is need for enhancing... but greater credit in agriculture has to be a part of a larger effort," Reddy, who is here for the annual meetings of the World Bank and the International Monetary Fund, said during the interactive session.
"Suicides are occurring in the states where credit is highest, where the bank credit is highest, and bank credit is highest where there is commercial agriculture," Reddy said. "Our diagnosis of the problem is that it goes beyond credit. It goes to the issue of risk mitigation mechanism, and that has to be addressed."
ICICI Bank wants to teach banking
October 16, 2007: ICICI Bank wants to teach banking to schoolchildren, in fact to anyone who wants to learn. And
this is for Reserve Bank of India, which has been exhorting banks to educate the public about the basics of banking. Hence, when ICICI asked for help, the RBI was more than willing to don the role of publisher and teacher for the cause.
Disha, the NGO front of the bank, launched the first of the series of its school comic books on
banking recently, and RBI released these books. RBI's general manager, Kamala
Rajan said, "This is one venture which has been done totally in-house starting from the animation done in the book to the text and ideas."
RBI has gone ahead and put the Disha comic book on its website, saying it is open for anyone to see. School principals formed the majority of people attracted to this and Disha says it will be confined to Delhi for now and it plans to have different formats for different schools. ICICI and Disha's chief
counselor Nutan Lughani says that other banks will also be involved in the school programme in order to scale it up. The book is just one step in the agenda of
Disha. "We are also providing assistance to the lay man in debt management and
counseling.
State Bank of India reduced interest rates
on various loans.
October 0, 2007: India's largest private sector lender State Bank of India
reduced interest rates on various retail, transport operators and farm mechanization loans. The rate cut is applicable for all new loans sanctioned on or after Oct. 8, 2007 and valid up to Dec. 31, 2007.
The bank reduced the interest rates on all new home loans, car loans, two-wheeler loans and personal loans. The home loans are now cheaper by 0.50% to 1% depending on loan maturities and amount of loan. The bank also gives discount if the salary account is with the SBI and further discount if a higher margin is available.
The new car loans and two wheeler loans have been reduced 1% depending on the amount and maturity of loan. Loans for new car loans are now available at 11% to 12% depending on the loan amount, maturity and type of loans. Similarly the personal loans are now cheaper by 0.50% to 1.00%. In addition to the above, the bank is offering 50% concession in processing charges on all the personal segment loans. For small road transport operators in SME sector, the bank reduced
interest rates ranging from 1% to 2% on the existing rates and the applicable rates will now be in the range of 10% to 12.25% for various loan maturities.
Rupee near 9-1/2-yr
high: RBI
MUMBAI, October 08. 2007 (Reuters):
The Indian rupee's approached a 9-1/2-year high and suspected Reserve Bank of India
intervention but investors expect fresh capital inflows in the coming days.
The rupee ended at 39.455/460 per dollar, stronger than Friday's finish of
39.48/49. It rose to a high of 39.38 in early deals, just shy of last week's
peak of 39.26, which was its strongest since March 1998. The stock market ended in the negative after trading near record highs, though
volumes in the currency market were curtailed by a holiday in Japan and the
United States. The rupee has been boosted by foreign investment in the stock market. Foreigners
bought a net of $1.45 billion worth of local equities in the first three trading
days of October, about 1/10th of their total net purchases for 2007.
The dollar gained against major currencies on Monday as last Friday's
stronger-than-expected U.S. jobs report eased worries about a recession in the
world's biggest economy. With the RBI being widely seen as playing an active role to temper the rupee's
rise, any ascent would be gradual from now on, dealers said, though the market
is expecting the rupee to hit 39 in the near future. The RBI bought $38.1 billion in the first seven months of 2007 in a bid to cap
the rupee, the latest data shows.
Source: PTI
RBI needs to cut
rates
New Delhi October 03, 2007: According to Assocham
survey the foreign institutional investors (FIIs) pouring huge money into the Indian stock and debt markets, the Reserve Bank of India (RBI) is left with very few options besides cutting interest rates as the dollar is expected to depreciate to Rs 37 mark by March
2008. As the inflation rate touched five year low of 3.23%, the survey involving over 215 CEOs and managing directors, revealed that 67% of the respondents felt that the stage is set for RBI to relax the monetary policy.
The investments by FIIs in September increased by $3205 million as compared to $1,318 million in same month last year, recording a whopping 143% rise, stated the survey.
Canada's Royal Bank seeks RBI nod for India entry
NEW DELHI, September 25, 2007:
Canada’s largest bank in terms of market capitalisation and asset base, Royal Bank of Canada (RBC), is applying for regulatory approval with the Reserve Bank of India for setting up base in India. The bank, which has assets worth $605 billion as of July 31, 2007, is also exploring the possibility of participating in government’s ambitious plans of investments in infrastructure. “RBC is applying for local regulatory approval to establish a representative office in Mumbai, India. Through direct representation in India, RBC will be better placed to begin exploring its strategic options in the country,” said a company spokesperson.
With India requiring $475 billion of investment over the next five years in infrastructure projects such as power, telecommunications, roads, airports and seaports, many large global banks are looking at opportunities in these sectors. Duetsche Bank, Macquarie Bank, Citibank and
Sumitomo Mitshui Banking Corporation are some of the large banks looking to make investment in infrastructure.
Source: The Economic Times
Banks split over rates: SBI against the rest
MUMBAI, September 24, 2007: A pressure point is building in the world of Indian banks. While most banks are inclined to cut interest rate on deposits,
SBI, country’s largest bank in terms of assets and branches, is in no mood to do so. Having lost market share to aggressive private and foreign banks in the past few years, SBI now wants to regain lost ground at any cost. It is willing
to pay a higher rate to mobilise more deposits and increase market share.
“We have opened the tap; it’s difficult to close it,” said SBI chairman OP Bhatt said at a bankers’ meeting last week at the Reserve Bank of India (RBI). With the biggest player taking such an aggressive stand, other banks are finding it difficult to lower deposit rates.
The biggest private bank and the second biggest player, ICICI Bank, is keeping its cards close to its chest, though its CEO KV Kamath said that RBI should consider a rate cut in the wake of weak IIP numbers. Currently, SBI is offering a maximum of 9-9.5% on bulk deposits and 9.25% on the special retail deposit scheme.
Source: The Economic Times
Banks pay more to raise capital in bond market
MUMBAI, September 21, 2007: Hybrid capital is turning out to be expensive for banks. The days of a double-digit coupon payable on bonds are back, with yields floating in the range of 10-11%. Recently, four banks had tapped the market with upper tier-II bond issuances, all of which had a tenor of 15 years with a call option after the 10th year. Similarly, perpetual bonds floated by State Bank of India and YES Bank saw coupons in the range of 10.45-11%.
According to a senior official from a bond house, the main reason for the rise in coupon rates is the rise in yields offered on corporate bonds. Rates had begun to harden across the yield curve, immediately after the central bank announced the quarterly review of the monetary policy in July. Rates had eased in the earlier part of July when call money rates were below the 1%-mark.
Now, passbook update at ATMs
Mumbai, September 19, 2007: Now you can withdraw money and simultenously get your
passbook updated at the automated teller machine (ATM) instantly.
Banks in association with NCR, a technology company, are planning to get the self service technology in India. With the Reserve Bank of India (RBI) making issuance of passbooks mandatory, banks are looking at cheaper options to offer this service to their customers.
In India, the ATM devices installed by NCR has factored in this
ability, which provides a huge opportunity for self check out technology in sectors such as retail, airlines and healthcare.
However, implementation of the self check out technology will not be easy in India. The
company will have to adapt the technology to Indian conditions. “Every passbook update costs the bank Rs 70 to Rs 80. The updating of passbooks at ATMs is a good concept but in India we have major bandwidth problem. Banks will have to train customers, there could be instances where in the passbook could get stuck in the printer. The customer wait time at the ATM will also increase,’’ said a retail banking head of a private bank.
The ATM penetration in India is also a matter of concern. Currently, the ATM penetration level in India is about 23 ATMs per million people.
However, public sector banks like State Bank of India and Canara Bank are ramping up their ATM network rapidly. Recently, NCR bagged a contract to install 3,000 ATMs for
SBI. Canara has also signed up with NCR for installation of about 2000 ATMs. This deal includes installation of biometric ATMs as well.
Source: Business Standard
StanChart to buy American Express Bank
LONDON/NEW DELHI, September 18, 2007: UK banking giant Standard Chartered today announced it will acquire US-based American Express Bank for about $860 million, a deal that will give it the much-needed additional branch licenses in India. The acquisition would be an all-cash deal, StanChart said in a statement. It is likely to increase the bank's network in India to a total of 90 branches.
Immediately after the announcement, industry sources said the development would have no impact on American Express' credit card business, which it plans to pursue aggressively across
the world including India.
StanChart said AEB's acquisition from American Express Company would be for a total cash consideration equal to the net asset value of AEB at completion plus $300 million in cash. As of
June 30, this would have amounted to about $860 million, it said.
AEB, whose New York-based parent company AXP is the third-largest credit card network, is a leading international bank present in 47 countries, including India. Among other benefits, "the acquisition will include valuable branch licences in India and Taiwan subject to regulatory approvals," StanChart said.
According to the data released by Reserve Bank of India, Standard Chartered is the largest foreign bank in India in terms of branches with a total of 81 branches, as against American Express Bank's seven branches as of September 2006 out of total 258 branches of 29 foreign banks. Since then, StanChart has got approval for two more branches in India, which it plans to open next month, a bank spokesperson told media from
Mumbai.
StanChart said that AEB provides it with an opportunity to add capability, scale and momentum in the strategically important financial institutions and private bank businesses. Additionally, it would create significant synergy potential across business lines with pre-tax cost savings
expected to total well in excess of $100 million per annum from 2009 onwards.
The integration is expected to take approximately 24 months to complete and most of the related costs would be borne in the first year after completion of the transaction. Cost savings
would mainly come from combining IT systems and back-office operations and support function efficiencies. AEB employs approximately 2,300 staff with over 85 per cent in Standard Chartered's existing footprint. The acquisition would double Standard Chartered's US Dollar clearing business, making it the world's sixth largest US Dollar clearer. AEB would also provide it with a direct Euro
and Yen clearing capability and would also provide opportunities to cross-sell Standard
Chartered's products. Source: Economic Times
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