Thursday, January 31, 2008
Reserve Bank of India's decision to hold its key rates, citing inflationary concerns, showed a mixed impact on rate sensitive sectors. Earlier Banking shares were steady in the trade and realty shares were also higher, but automobile stocks showed decline.
The indices--benchmark and sector--have since moved away further. The BSE Bankex Index was down 0.59 per cent at 11,054.29 and Realty Index weaker by 0.72 per cent at 10,326.11, while the BSE Auto Index down 1.82 per cent at 4,834.21.
In the banking sphere, the losses have been at low-key, maximum being 2.4 per cent on Bank of Baroda, while others were down in the range of 1.40-0.14 per cent. The second largest public sector, BoB have plans to announce its third quarter results today. Other losers comprised Axis Bank (down 1.40%), Kotak Mahindra Bank (1.26%), ICICI Bank (1.17%), Andhra Bank (1.13%), Bank of India and Karnataka Bank (both down 0.85%), Centurion Bank of Punjab (0.78%), Indian Overseas Bank (0.70%), Federal Bank (0.14%).
Earlier in the day the Bankex had touched a high of 11,179.98, while the low so far was 10,981.13.
Among automobile shares, Bajaj Auto declined, down 3.94 per cent at Rs 2,285. Mahindra & Mahindra was weaker by 2.44 per cent, followed by Maruti Suzuki down 2.32 per cent, while Escorts, Tata Motors and TVS Motors were down nearly 2 per cent. Hero Honda and MRF lower by 1.4-0.90 per cent.
The BSE Auto Index earlier in the day had made a high of 4,944.25 before sliding to 4,816.32.
In the realty space, except for Mahindra Lifespaces and India Bulls Realty, all others were down 2-1 per cent. Mahindra Lifespaces and India Bulls Realty were down 3.14 per cent each.
"As part of our strategy to expand our reach, we are planning to open 56 new branches in the country. Out of these, 50 branches will be opened in northern and western regions," ING Vysya Bank Country Head (Retail Banking) Uday Sareen said.
After the opening of the new branches, it is expected the total branch network of the bank to reach 493 in the country.
The bank has put forward the proposal for the opening of 100 ATMs in the country with an aim to reach closer to customers, is waiting for the approval from the RBI. Presently, the bank has 200 ATMs at several parts of the country.
Inspired with the growth in retail banking segment, the bank is hoping for 50 per cent growth in advances to home loans and personal loans and 25 per cent growth in lending to SME sector.
"We would like to see our home loan and personal loan segment to grow at rapid pace in the coming months," he said.
The bank is doing the total business of Rs 30,000 crore, out of which the bank has retail assets of Rs 7,000 crore including advances to agriculture sector.
Wednesday, January 30, 2008
The government’s main source of liquidity for the market was the expenditure and intervention by RBI in the foreign exchange market to stem the rupee appreciation
Therefore liquidity remained comfortable with the RBI engrossing around Rs 14,000 crore from the system.
In the past few days, RBI was not able to contract sell-buy trade as the system has been short of liquidity. Thereby any purchase of dollars by RBI is resulting in infusion of the rupee liquidity in the market. Interest rates, at which banks lend and borrowed funds from the market for their daily requirement, was higher at 6.90 per cent even after reaching low of 5.50 per cent. As per dealers, interest rates firmed up because banks were cautious about the liquidity at the meeting of the monetary policy review on Tuesday. The seven banks who are managing the initial public offer of Reliance Power, the money wedged with them yet has to come back to the system. Rates on the collateralized lending and borrowing market (CLBO) were also ruled higher as mutual funds lent with caution, fearing bad recovery of funds till liquidity eases.
The government securities (G-sec) trading market lacked shine as most of the dealers remained out of the market. Most of the market participants had gone overseas to attend a conference organized by the Fixed Income Money Market and Derivatives’ Dealers’ Association (FIMMDA). Volumes remained low at around Rs 5,120 crore and the market witnessed a heavy selling pressure towards the end of the trading session.
A dealer said as the outcome of the monetary policy review to be held on Tuesday is not known, traders do not want to build opinions. Prices established in a narrow range of 10-15 paise and remained flat in the shorter end of the maturity. Last week the yield on the benchmark ten-year paper closed at 7.45 per cent as against 7.39 per cent. In the same way the yield on the 91-day T- bill settled around 7 per cent.
OIS and corporate bonds: Brisk trade
As the position of the interest rate remain uncertain and dealers are doubtful of a repo rate cut in the monetary policy review on Tuesday, yields on the overnight interest rate exchange market firmed up. Against maturities, yields firmed up by 2-4 basis points. Banks got into deals wherein they paid in fixed rate of interest and received in floating rate of interest. The overnight interest rate swap (OIS) market is an imitative product based on the fundamental of the interest rate on government securities. The one-year segment, which witnessed brisk trading profit summed up from 6.59 per cent to 6.63 per cent. Even the corporate bond market trading lacked shine with yields settling flat. On the long end of the maturity, the yield on the triple-A bonds for a ten-year maturity established around 9-9.05 per cent. While on the shorter end of the maturity, there was selling of commercial papers and certificates of deposits by mutual funds, which have remained liquid fearing bad recovery.
Rupee: Ends up
The mark-up rupee opened at 39.43 to a dollar, but trailing on profit-taking and consequent sell-off in the equity market, it fell to 39.49. At these levels, exporters sold dollar in large volume receivable at least in the near term of one or two months. This led the spot rupee to close at 39.38-39 to a dollar.
The annualized premia closed at 2.15 per cent and 1.7 per cent respectively for six-month and one-year forward dollars.
Monday, January 28, 2008
Bankers are now requesting for a cut in interest rates, on seeing the difference between the US and Indian rates following the 75 basis point cut by the Fed on January 22. Though the finance minister did not hinted to the possibility of cut in rates, but he has said it is left to the central bank.
This step is possibly being taken because both the government and the regulator do not want the stock market recovery to gather strength and turn into a full-fledged rally again.
But regardless of RBI’s disinclination to give in to the market’s demand, a 25 basis point reduction in the repo rate is probably the best alternative before it. Although oil prices continue to be a concern, inflation is still well below the targeted 5%. On Tuesday the RBI will be announcing the third quarter review of its annual policy.
“The argument not to have too wide a rate gap is that it increases the costs of currency intervention/sterilization; the RBI has to buy lower and lower yielding US assets, while the government issues higher-yielding Indian bonds to fund this,“ said economist Robert Prior-Wandesforde, in a report issued by the Hong kong and Shanghai Banking Corporation, Singapore.
Bankers met deputy governor Rakesh Mohan before the policy has conveyed their expectations of the economy. They stated that while credit growth has been decent, because of the rupee’s appreciation there has been a slowdown in textile loans. Even consumer and real estate loans demand have also come down and in line with the signals sent by the central bank. According to Indian Banks’ Association head HN Sinor, the central bank might signal a 25 basis point cut in rates.
A rate cut in January is required to keep in mind that there are all probabilities of the Fed cutting rates before the central bank’s April policy. This might further widen the gap between Indian and international rates. Merrill Lynch’s US economists expect the Fed to cut again at its March 18 meeting before RBI’s end-April 2008 policy.
They expect a 1% Fed rate by the first quarter of 2008-09 to counter a recessionary three consecutive quarters of negative growth ahead. However the Indian economy is not as dependent on exports as some of its Asian peers, the government has become aware of the impact of an export slowdown.
“The central bank may have to continue intervening to maintain the rupee-dollar pair in a tight range. The task will become complicated if risk appetite returns and global capital starts chasing domestic assets again,” said ICICI Securities.
The bond house added that the central bank has to signal lower lending and deposit rates to achieve this objective. “In order to send a clear cut signal, we expect RBI to cut the repo rate by 25 bps to 7.5% in the next week’s policy announcement,” I-Sec said in its report.
Thursday, January 24, 2008
"We will not resort to panic selling as we are confident that the markets will revive as the fundamentals of the economy remain strong," BoI Chairman and Managing Director T S Narayanasami told reportes here.
On Tuesday the 30-share Sensex continued its southward movement for the second day, registering an intraday fall of 2,029 points.
Though trading was suspended for about an hour but the index still closed in the red, down by over 850 points.
"The current crisis is a temporary thing and we in the bank are taking a very pragmatic view of the situation. We will be willing to provide brokers with additional liquidity," he said.
He added in case it is required, the bank will, with due consent of the regulator, may think over of adjusting the margin for them.
According to laws, bank's capital exposure can be 40 per cent of their net worth. Bank of India can take exposure up to Rs 2200 crore, which at present was much below the figure.
Convener of United Forum of Bank Unions, C.H. Venkatachalam, said the unions, representing about 900,000 employees, also have plan to go on a two-day strike from Feb 25 if their demands were not met and on an indefinite strike from March-end.
He said all state-run, private sector and Indian operations of foreign banks will be affected by the strike but co-operative and regional rural banks have been kept out of the strike.
Meanwhile the Chief Labor Commissioner has called for a tripartite meeting with the Indian Banks' Association (IBA) and unions on Wednesday in New Delhi in order to try and resolve the matter.
The unions are opposing to the mergers among public sector banks including associate banks, outsourcing and contractual employment, as well other issues.
He told that they have also sought for one more opportunity to go for for pension schemes for those who did not opt earlier, besides compassionate recruitment.
"The issues have been lingering for months and years," Venkatachalam told Reuters from the southern city of Chennai.
An IBA official said it is not possible to tackle all their demands except that on wage revision, which the unions have demanded for an early settlement.
"We are in the process," said IBA's senior vice-president and chief advisor (personnel), G. Sankaranarayanan, adding the proposal was received recently and mandates were being sought from member banks.
On being asked about the issue of compassionate appointment, whereby the next-of-kin of deceased staff were employed directly, he said it is no longer possible on a one-to-one basis but can be considered only on the basis of need of the respective bank.
He further added because of financial costs it would be difficult to open up the pension scheme in its present form for those employees who did not opt for it earlier.
Wednesday, January 23, 2008
Following the advice of the finance ministry many banks have started working on plans to give assistance to brokers to make sure they do not default on any payments in the course of an unstable stock market.
“The government has asked us to consider ways to help market players get over any panic”, a senior official with a large public sector bank said.
“We could think of additional credit limits and adjustments in margins to certain extent,” a senior Bank of India official said.
In due course banks can also decide on not selling securities which have been kept as guarantee with them by borrowers. “We are confident that the stock market would stabilize as the current turbulence is a short-term phenomenon,” the BOI official added.
All the decisions would be taken within the prudential framework like hold on to the limit on capital market exposure, said a top executive of another PSB.
“We are responsible market players, so we have to act. We are increasing our capital market exposure,” the chairman and managing director of a large public sector bank told Business Standard.
Many banks and institutions are using market conditions for buying fundamentally strong stocks at cheap prices.
On Tuesday Life Insurance Corporation (LIC), the country’s largest financial institution, purchased shares worth Rs 650 crore, over and above the Rs 900 crore of purchases done since the market slide began last week.
On normal days, LIC’s do the trading of shares is around Rs 100 crore per day. Whereas the sharp fall in stock prices has given LIC an opportunity to buy large volumes of shares of many fundamentally strong companies at attractive valuations. LIC have a strong preference for large cap stocks which form the NIFTY index.
According to the figures available with the BSE, domestic institutions have bought net 2778.71 crore and FIIs have net sold 4265.19 crore.
A finance ministry official said no specific directives or instructions have been given to banks and FIs to ramp up the market.
“But if they have money and mind, they will put it in the stock market”, he said.
According to another finance ministry official public sector banks and financial institutions are being encouraged to purchase as much as equities as possible on the market, not engaged in panic sales of shares and show leniency towards brokers demanding additional margin money.
Public sector units in the market have also been asked not to engage in sale of securities deposited by brokers for margin requirements as part of their internal “stop loss” thresholds.
The idea behind all this is not to take any such steps that would cause a liquidity crisis for brokers, which can lead to severe consequences for the markets.
“Public sector financial institutions will take a higher position tomorrow. There were some fears of banks, regarding operating in a falling market. Those have been removed,” the official said.
“The discussion (with some public sector financial institutions) is that the line of credit to brokers should continue as per RBI guidelines. Banks have to improve their treasury income. It is fact that whenever the banks take a position in a falling market, they make money, as the market has rallied up subsequently,” the official added.
Indirect involvement of the government through public sector in a falling stock market financial intermediary is not a new development.
Till foreign capital flows took a liking to Indian equities, public sector FI’s were among the biggest players on the bourses.
Finance Minister P. Chidambaram, before leaving for an overseas trip on Tuesday, said that there would be no liquidity crisis.
Speaking to reporters outside his office, he said: “I am assured by RBI and all the banks that enough liquidity will be provided to brokers and market players. Liquidity will not be an issue.”
Tuesday, January 22, 2008
It said in the current fiscal year operating profit grew 108% to Rs 128 crore, from Rs 61 crore last year.
In the first quarter the bank finished with a net interest margin of 3.6%, up slightly from the 3.5% of the second quarter of 2007-08. As on December 31, 2007 end of the quarter the, net interest income increased 38% from last year to Rs190 crore.
There was a growth in the bank’s wealth management business due to which the non-interest income showed a healthy growth of 57% to Rs 160 crore. Fees contributed for 46% to the bank’s total income.
The bank said advances grew by 60% to Rs 15,083 crore and deposits by 65% Rs 20,710 crore over those at the same time last year.
The net bad loans to net customer assets amounted to 1.69%.
Monday, January 21, 2008
"We have approached RBI for 15 more overseas branches in the developing places like South-East Asia and other emerging countries," Canara Bank Chairman and Managing Director, M B N Rao, told PTI.
At present, the bank is having branches in three countries Hong Kong, the UK and Russia.
The Bangalore-based bank recently opened its branch in Hong Kong and proposes to convert Shanghai's representative office into full-fledged branch by the end of March, 2008.
Rao said RBI has already given the five licenses to open the bank branches in Johannesburg, Frankfurt, Muscat, Manama and Qatar in due course of time.
Meanwhile, it is also planking to start an online share trading gateway during the month to raise fee-based income.
He told that the bank has started the trial run which will provide trading platform, for both the corporate and retail traders.
Other than trading option, the gateway will also provide features like market-related information, research report, technical market analysis and sector watch.
With the operation of the platform Canara bank will become the first public sector lender to launch such a platform.
The bank intends to introduce other products like international debit card to increase fee-based income.
Friday, January 18, 2008
The secret behind this is the outsourcing all back-office work which has helped the bank to offer a higher yield on High-Save , which is basically an internet-based savings account. “Given that we have a great back-end processing unit back home in India, we try and outsource all back-office work related to retail banking to India. ICICI Bank UK PLC has a costto-income ratio of less than 25%, much lower than any other British bank” says Sanjoy Chatterjee, executive director, ICICI Bank.
Apart from retail customers, the bank has looked upon the self-employed professional in the UK as its potential customer. These are individuals who are owning businesses having a turnover ranging from £1 - 5 million. Chatterjee told that in the last one year, many of these clients in UK have approached the bank with transaction banking needs as well.
These clients come up for foreign exchange related products or lines of credit, something of which the traditional banks of a British origin do not take much interest.
While in Rome, do as the Romans do. ICICI looks like to be following this proverb to the maximum extent. While the bank is aiming at diamond units in Antwerp, the nouveau riche of Singapore are being taught better ways to manage their wealth. Corporates in Canada are also being looked upon as potential clientele, while Indians working in the Middle East are potential clients of the remittance segment.
ICICI’s international banking business is mainly driven by three forces: NRI remittances, putting core competencies to better use and corporate and investment banking services. The latter power overseas gaining of Indian corporates . These are the businesses which fill up ICICI’s fee income pool, by bringing in fees for advisory services, funding client needs and offering derivative products like interest rate swap.
Banks getting into new markets overseas have to put up a good performance. There are so many opportunity waiting for them, while, at the same time, the industry is highly controlled with multitude regulations that stand between overseas banks and their potential customers. How is it possible for a bank to make it and its potential customers feel at home and find its ground in a hitherto-unknown land? One can be by setting up a strong workforce, which includes a judicious mix of locals and expatriates. The other way is to zero in on the niche areas in the initial phase and then branch off into other regular activities.
ICICI saw an international banking as a key opportunity in 2001. The main aim was to look into the needs of the offshore client. In 2002, the bank set up the International Banking Group (IBG) to implement a focused strategy for its international banking business. Today, it is having a strong position in about 18 countries in the form of wholly owned subsidiaries offshore banking units, representative offices and full-fledged branches.
In the past five years, it has set up subordinates in the UK, Canada and Russia; offshore banking units in Singapore and Bahrain (have received a full fledged banking licence now) ; branches in Dubai, Sri Lanka, Hong Kong, Qatar and ICICI UK PLC branches in Belgium; and representative offices in the US, China, UAE, Bangladesh, South Africa, Indonesia, Thailand and Malaysia.
So how much does the bank gathers in the form of revenues from its global banking operations? The bank’s international operations as on September 30, 2007, accounted for about 22% of its consolidated banking assets, while in absolute terms, assets from international banking account for Rs 88,000 crore. The bank’s remittance business amounts were about Rs 8,600 crore during the second quarter of 2008. ICICI Bank UK’s profit was $ 36 million after tax for the six-month period ended September 30, 2007 (H1-2008).
ICICI is not the only one in this race to set up shop in offshore markets. The country’s largest public sector player, the State Bank of India, others like Bank of India and Bank of Baroda, too are interested in having a strong overseas presence. In the UK, Bank of India, Bank of Baroda and Canara Bank too have begun operations.
SBI has foreign banking subordinates in Mauritius, Canada, California and Moscow, while Bank of Baroda has a presence in countries such as China, Tanzania, Botswana, Malaysia and South Africa. Bank of Baroda is now looking at fresh opportunities in Canada, New Zealand, Qatar and Kuwait. Bank of India has set up presence in France, Singapore, Kenya, Japan and Belgium.
In UK, ICICI has managed to grab upon a large number of NRI clientele, the idea behind it was to open branches in places such as Wembley and Southall which boast of a very high degree of civilization, a term used to refer to Indian populace abroad. While these customers may step into ICICI branches with an aim of depositing some cash into their accounts, the trick is to draw them into other offerings as well, which includes facilities such as overdrafts, cards (credit and debit) and internet banking.
Even though the broad plan is more or less centered around these three key drivers, the bank prefers to approach a new market through tailor-made solutions , specific to each market.
“While a greater degree of penetration is achieved, we could even explore other opportunities such as consumer credit in markets abroad,” says Chatterjee. “Our current focus is on finding out which could be the markets where we could achieve a deeper penetration, by having a wider franchise and building a more solid foundation. The aim is to have a two-sided benefit. The first would be via liabilities, as it could provide us the access to better funds at a lower cost. The second would be via assets, through which we could also provide a deeper linkage to India.”
Wednesday, January 16, 2008
There has been increase mainly because of a strong year-on-year growth of 27.17 per cent in non-interest income.
In the three quarters of 2007-08 the bank’s total income was Rs 2147.22 crore which has grown by 30.95 per cent year-on-year to touch Rs 2811.84 crore.
A year back the interest income went up by 31.40 per cent to Rs 2,522 crore from Rs 1919.31 crore, while non-interest income touched Rs 289.84 crore from Rs 227.91 crore.
By the end of December 2006 the bank did the total business of Rs 53,644 crore whereas it exceeded Rs 60,000 crore to touch Rs 61,241 crore at the end of December 2007.
SBT’s overall deposit income registered a year-on-year growth of 9.58 per cent to Rs 33,160 crore, in which personal deposits accounted for 62.79 per cent.
The bank stated total advances raised by Rs 28,164 crore, registering a year-on-year growth of 20.06 per cent over December 2006.
The main sector of the bank, lending grew by 39.34 per cent on a yearly basis and touched Rs 12,964 crore. The percentage of priority sector advances to total advances is 46.03 per cent against the benchmark of 40 per cent.
The bank told that its capital to risk adjusted assets ratio (CRAR) grew up to 13 per cent as on December 2007 from 11.68 per cent in March 07, against the regulatory benchmark of 9 per cent.
While it’s gross NPA percentage came down to 2.14 per cent of gross advances from 2.47 per cent as on December 2006 and 2.16 per cent from March 2007. The net NPA percentage showed a decline to 0.97 per cent from 1.26 per cent as on December 31, 2006 and 1.08 per cent as on March 2007.
But the question arises whether such a system is really needed. Further, if it does finally come up, will it really serve any purpose?
Last year the banking industry had paid an estimated $100 million in terms of fees and commission to card associations like Visa and MasterCard. IBA feels that with the heavy promotion and adoption of card-based payments, this figure will grow futher.
The concept of the indigenous payment and settlements association as is known, for India Pay, it is not new and not without international standard. However, IBA has been working on it for over a year now. IDBI Intech MD & CEO Sanjay Sharma, is in-charge of the project and is confident that it will see the light of the day soon.
“Everyone in the IBA feels there is a need for such a system. We have set up a working group to look into the investment required, and will be preparing a business case within two or three months,” says Mr Sharma. He doesn’t expect any problems regarding the approval since all stake holders are “in sync with the idea”. RBI too supports it completely, he adds.
India Pay is a payment-settlement network that is looking for the replacement of the Visa and MasterCard-dominated system. Though, it will continue to have a tie-up with these card associations to facilitate international payments. Usually, payment-settlement networks make possible the payment of a credit or debit card transaction.
Simply placed, a merchant’s point of sale machine is connected to the card association’s server, which in line is connected to the acquiring banks concerned. So when a card is swiped, the card association acts as a ‘switch’ and makes easy the payment from the bank to the merchant in return it charges a certain fee for each transaction.
Fees based on their relationship and the volume is also charged from the bank. The India Pay network looks for to replicate the role of these card houses. According to Mr Sharma the fee being charged will be considerably lower than what MasterCard and Visa are charging.
But margins are not really all that large in the payments business. The charges taxed on merchants range from 1.2% to 1.6% of the transaction, out of which up to 1.1% goes to the issuing bank and card associations get about 0.05%. The rest goes to the acquiring bank. At present it is not clear as to how much of decrease will be there in these charges from the current levels. “The payment to MasterCard or Visa is a very small part of the value of the payment chain,” says a MasterCard official.
On a point of sale terminal the average size of a transaction is around Rs 1,000. In case where the charges are only 4 cents it comes up to around Rs 1.50 which would mean a cost of 0.15%. There is variation in the cost, differ from bank to bank. Increase in the transactions lower the costs. In some of the transactions no charges are made. The charges have to be careful of investments in standards, security, technology, international connection and inter-operability among other things.
Although the figure of 1.1% of a transaction appears to be very high for the issuing bank to get, it needs to provide for a 45-day interest-free repayment period for a credit card; where there is transaction cost involved.
According to a senior private sector banker, “Maintaining a payment gateway for cards is much more complicated than maintaining an ATM switch. There are a lot of issues involved relating to frauds, dispute-resolution and charge-backs. Even if an Indian player comes in, it’s unlikly to make a major difference as the charges by Visa and Master are minuscule, at around 5 basis points.”
Some bankers are of a view that there is no need to generate a parallel infrastructure for a system that is working perfectly now. The most relevant issue senior bankers are concerned with is whether Indian players can bring in the same amount of strength and fool-proof methods as in the current system.
IBA’s vice-president and deputy CEO K Unnikrishnan pointed out that India Pay is an effort towards developing an internal system for card-related payments rather than having to depend on international players. “It is more from a perspective of development of a system that will foster the growth of further innovations than a cost-cutting one,” he feels.
A considerable amount of infrastructure is already available which the India Pay network can make use of, for example RBI-owned Indian Financial Network (Infinet), and the National Financial Switch (NFS). “What needs to be created is an inter-bank switch, which will facilitate inter-bank transactions,” feels Mr Sharma. However it is to see how IBA is going to tackle it, as acquiring banks might not want to do away with the commissions they get out of these transactions.
Banks’ competitive advantages might get affected by such a concept. At present infrastructure, in terms of networks, tie-ups and ATMs, is owned by a select group of banks, and use it as a competitive advantage. Recently State Bank of India had refused to join NFS because it did not want to part away the commission it earned out of charging banks for use of its ATMs.
At a conference organized by the IBA last week, a data was presented according to which the number of debit cards in the country is set to double to 140 million by 2011, while the credit card base is expected to more than triple to 75 million. Such integrated payment networks have found importance in countries like China, Singapore and the Middle East.
China Union Pay, was set up in 2003, is the backbone of Chinese electronic payments and has been recognized by Visa and MasterCard for international transactions. Network for Electronic Transfers, Singapore (NETS) is another such network, whereas Gulf Payments is a Middle-East based network that facilitates payments in all its member countries, including Kuwait, Bahrain, Oman, Qatar, the UAE and Saudi Arabia.
At the primary stage, the India Pay network aims to cater only to the card-related payment and settlements. Further a complete unified payment gateway can be formed as backbone for other electronic transactions such as card-to-card transfer and mobile money transfers. “Once the infrastructure is put in place, it can give rise to further innovations like gift cards and micro-payments by the mobile phone,” says Mr Sharma.
Monday, January 14, 2008
It will also provide guarantee for the requirements of banks/HFCs to be able to make regular payment over the expected period to the senior citizen borrowers.
This will help the senior citizens who are mortgaging their house upfront to receive payments over the period.
Addressing the seminar on reverse mortgage seminar organized by NHB and Harmony for Silvers Foundation, S Shridhar, NHB chairman, said, “We decided to provide guarantees because senior citizens’ organizations had raised concerns about lenders defaulting on their obligations before designing the reverse mortgage scheme,” said Shridhar.
He said “During the loan, if something happens to the borrower, NHB will make good the payments to the bank”.
NHB will also open counseling centers, and the first centre will be opened at branch office in Delhi on reverse mortgage.
Shridhar told that in July last year, talks were held between NHB and IRDA and insurance companies to combine the reverse mortgage loan with an insurance plan, which would provide an pension to the senior citizen after the loan tenure of 15 years are over.
Saturday, January 12, 2008
He said but this is possible only when the central bank, Reserve Bank of India (RBI), do not increase the cash reserve ratio (CRR).
"Interest rates could go down by 25 basis point if RBI does not hike the CRR," Parekh said.
Parekh further added that there would be decline in the interest rates because of the rupee strengthening against the dollar.
But, Parekh said as India is not an export-based economy; a decline in the US would not affect it in a big way.
He said that China and South East Asian countries, however, would experience a tremendous impact of a US slump.
The conference was inaugurated by the Maharashtra Chief Minister Vilasrao Deshmukh in the presence of Minister for Overseas Indian Affairs Vayalar Ravi. Chairman of the Knowledge Commission Sam Pitroda also attended the inauguration.
More than 150 delegates from 15 countries and 250 from India attended the conference.
Foreign banks operating in India have requested the Reserve Bank of India (RBI) to prepare a vision document on policy changes expected after March 2009.
The foreign banks will be listing their demands in a report that would be submitted to the RBI soon, under the guidance of the Indian Banks’ Association (IBA).
Citibank’s India head Sanjay Nayar is the head of the standing committee of foreign banks at IBA, which has drafted a report. The report will be finalized at the committee’s meeting later in this month.
The members of the committee consist of India heads of HSBC, Standard Chartered, Deutsche Bank, BNP Paribas, ABN Amro Bank, Bank of America, American Express, DBS Bank, JP Morgan, Barclays and Calyon. The foreign banks stated that the guidelines by the RBI will help them prepare and plan for the future.
The guidelines also stated that the RBI will be considering for treating the wholly-owned subsidiaries of foreign banks in India in a similar way as Indian banks, with a provision to list on Indian exchanges.
“We are just giving our views. It is up to the RBI to accept or reject them. The draft paper would detail issues concerning capital-raising options for foreign banks in India and their branch expansion, among others. The white paper looks at the roadmap for foreign banks post-2009. It expresses an opinion on how the banking sector should be, post 2009,” said a banking source.
Recently RBI deputy governor V Leeladhar commented on how the Indian regulatory regime for foreign banks was very liberal by global standards. After this the foreign banks committee took a decision to submit its report to the RBI.
Leeladhar had said the Indian regulatory regime is much fairer and provided a far more smooth ground to foreign banks than many other jurisdictions, both developed and up-coming economies. He also complained about the lack of commercial policies from regulators of other countries.
A senior executive with a foreign bank said, “The year 2009 is an election year and foreign banks are of the view that any change in government can affect the policy stance in the country. Since the RBI is an independent body, it would be nice if it could spell out a guidance note on the policy changes in advance. This will enable us to draw up India plans.’’
Branch expansion continues to be a major point of debate between the foreign banks and the regulator.
“The RBI has been issuing fresh branch licenses largely in the rural (under-banked) centres. There has to be some parity. There has to be a mix of rural and urban or semi-urban centres. You cannot expect a bank to open branches only in the rural centers. Capital raising and auditing of branches are some other issues which would be raised through the white paper,’’ said another foreign banker.
Thursday, January 10, 2008
Speaking at a press conference he told that the Thrissur-headquartered bank has obtained license to set up seven mobile ATMs in cities including Chennai, Thiruvanathapuram and Coimbatore.
He stated that certain issues are there to be sorted out and after getting regulatory approval the first ATM will be installed in Thrissur probably by the next month end.
"Once the police permission is through, other things will fall in place and by June, all the seven mobile ATMs will be rolled out," he said.
In the press conference Venkatraman also announced that the CSB had chosen the Bangalore-headquartered Sun Microsystems India for the implementation of comprehensive Core Banking Solution (CBS) to help centralize its operations for ensuring speedy and flexible services to customers.
He told that by the August next all the 356 branches of the bank would be included with the CBS.
Although the difference in this quarter profitability is that, the profit came more from net interest income (core business) rather than non-interest income unlike in last several quarters.
Net interest income jumped by 91 per cent y-o-y to Rs 747 crore—this being the highest in the past four quarters—whereas advances and deposits grew by 50 per cent and 35 per cent respectively and also there was an increase in net interest margin (NIM).
Its NIM showed an increase by 63 basis points q-o-q and 91 basis points y-o-y to 3.91 per cent. This was because of a jump in profit on advances while CASA (current and savings account) was maintained at 45 per cent sequentially.
Although other income went up 74 per cent y-o-y to Rs 488 crore, but still it was lower than the 87 per cent growth reported in the September 2007 quarter.
There was an increase of 81 percent to Rs 348 crore in the bank’s fee income and trading profits were up 65 per cent to Rs 131 crore in Q3. All these factors are responsible for the doubling of operating profit to Rs 672 crore while operating expenses went up by 67 per cent.
Moreover, its net profit grew relatively slower at 66 per cent to Rs 307 crore as supplies and emergencies went up 290 per cent and a 68 per cent jump was recorded in tax provisioning. However, growth in net profit is still higher than previous three quarters and has been higher than expectations.
Axis Bank is comparatively resistant to the slowdown in the retail credit and high cost of funding. This is because other advances like corporate, SME (small and medium enterprises) and agriculture loans have grown faster than retail advances and retail credit’s share of 25 per cent has gone down from 28 per cent last year.
On Wednesday the stock closed 2.5 per cent higher on the bourses. However, at Rs 1,096, the stock has risen nearly 50 per cent in the last three months and trades at 4.2 times its FY09 estimated adjusted book value, and looks fairly valued.
In the December 2007 quarter iGate was able to counterbalance the 1.5 per cent q-o-q rupee appreciation through a tight check on its operating costs and enhanced volume and billing rates in areas such as ERP and data warehousing.
The US mortgage servicing business, which has been a drain on the company since the fourth quarter of last year, continued to do badly.
Therefore, its operating profit grew 15.8 per cent q-o-q in Q3 FY08, while its operating revenues rose 4.3 per cent q-o-q to Rs 209.3 crore. The rupee appreciation affected the top line growth by 2.2 per cent.
Nevertheless, iGate’s working profit margin rose 170 basis points q-o-q to 17.5 per cent in the last quarter. The stock gained about 1 per cent to Rs 401 on Wednesday.
In the September 2007 quarter too, the company had accounted a 260 basis points q-o-q growth in its working profit margin. Meanwhile, in Q3 FY08, iGate extended its revenues from North America and Asia Pacific on a sequential basis, which helped overall IT services revenues rise by 3.7 per cent q-o-q.
Also, the company was able to influence a 6.1 per cent q-o-q growth in onsite volumes, coupled with a 3.5 per cent q-o-q growth in onsite billing rates.
Though the company’s offshore part declined 100 basis points q-o-q in the last quarter, but senior management officials figured out that increased use of relatively less experienced employees helped keep direct costs under check.
The company management is having a positive point of view about the pricing environment and expects to grow revenues by 5-6 per cent sequentially over the next few quarters.
iGate promoters made an open offer through reverse book building at Rs 410 and now own 93.4 per cent in the company. The stock is expected to be delisted. Existing shareholders who were not able to take the shares can now take them at same price.
Wednesday, January 9, 2008
On January 5 the Khumbong branch of the Jawahar Navodaya Vidyalaya was also closed following similar demands from an armed organization. Parents worried for their children have withdrawn them from the school. While the school principal had appealed to the parents to send back the children by today. Armed guards from Indian Reserve Battalion have been posted round-the-clock to protect the school.
According to reports available the employees of around 15 branches of the United Bank of India have refused to come back to work in spite of the pressure from its headquarters in Kolkata to keep the transaction going on in all its branches.
Due to close-down of these branches, all transactions running into crores of rupees daily have come to a grinding halt. The UBI used to be one of the leading banks in the state before it was taken over by the State Bank of India; still it has a strong presence in Manipur with several branches in rural and urban areas. Besides from handling commercial transactions, the UBI also handles salary and pension payments of the government employees.
Under the banner of United Forum of Banks Union employees are holding a dharna at the main branch in the capital located along the MG Road, demanding the withdrawal of the demands for money.
A meeting of the forum has also appealed to neighborly banks to support their protest. The forum decided to stop work indefinitely till the illegal militant organization withdrew their demand for money.
An employee of the bank said that when they took the matter to the regional office and headquarters office, they were ordered to keep the branches open and not to acknowledge to the demands of the armed groups. In such a situation, only the employees will become the soft targets. "We also cannot meet the huge demands from our own pockets," he added.
Another employee told that the bank has been frequently receiving threats. For fear of retaliation, the bank employees or their union are yet to lodge complaint with the police.
Meanwhile, the Imphal West police have registered a suo motto case. Before also, the financial institutions have received threats. The LIC Imphal branch had to be closed down for about two weeks in June 2007 following demands for money.
Banks were taking precautions in lending today even as liquidity was in surplus as they are set for outflows in the market.
Termed rates, at which banks lend and borrow for their daily fund requirement, floated around 5.5-6 per cent. However, RBI mopped up around Rs 4,650 crore from the market today compared with Rs 12,000 crore on Monday.
Rates in the collateralized lending and borrowing (CLBO) market also remained above 6 per cent since mutual funds feared compensation from banks to manage liquidity in coming days.
G-sec: High volumes
Aggregate in the government securities market was at Rs 11,000 crore as most of the banks bought bonds in the beginning of the trading session and then gained profits. As a result, the profit fell first then rose during the latter half of the trading session.
According to dealers, most of the banks engaged in trading and floating portfolio in preparation for the government’s security auction to be held on Friday. The profit on the ten-year benchmark paper first fell to 7.64 per cent, but closed during the day at 7.67 per cent.
Prices of government securities showed a growth by 30-40 paise across maturities. Although, profits in the shorter end of the profit curve rose marginally after falling since the outlook on liquidity was expected to fall.
The long-term deed with the maturity of 30 years rose up by 72-75 paise
Tracking firm yields in the short term, the market expects the cut-off yield in the auction of 91- and 182-day treasury bills to move up by 4-5 basis points compared with the last week’s yield. The 91-day T-bill fetched a cut-off yield of 7.02 per cent last week.
OIS and corporate bonds: Yields rise
The concern on liquidity tightening towards the end of the week moved yields up in the overnight interest rate swap market (OIS).
While other maturities ranging from one year to five years witnessed firming up of yields by 2-3 basis points, in the three-month maturity, OIS yields moved up from 7.05 per cent to 7.15 per cent.
The possibility of liquidity tightening and resulting firmness in interest rates led banks to hit OIS deals in which they preferred receiving in floating rate of interest and paid in the fixed rate of interest.
The OIS market is a derivatives product based on the underlying of the interest rate on government securities.
There was brisk activity in the corporate bond market. The easing of yields in the three months to one year maturity that followed easy liquidity last week continued.
Oriental Bank of Commerce and State Bank of India associates raised funds through one-year certificate of deposits (CDs) at 8.60-8.70 per cent. CDs of private bonds were raised at 8.75-8.8 per cent, while foreign banks like ABN AMRO and Standard Chartered raised funds at 8.88-8.90 per cent.
Andhra Bank raised 10-year funds at 9.15 per cent. The triple-A-rated bond of LIC Housing Finance mopped up funds at 8.94 per cent for three years and at 9.14 per cent for 10 years.
Rupee: Ends flat
The spot rupee gained a fresh nine-year high of 39.21 after opening for the day at 39.22-23 to a dollar. This followed heavy selling of dollars by foreign banks on behalf of their FII clients, otherwise referred to as collective investments.
Later on there was massive intervention of RBI, which bought dollars in the spot market. There were no exchange deals by RBI to book the dollars at a future date.
Therefore, the annualized premia for the six-month and one-year forward dollars came down and closed at 1.44 per cent and 1.22 per cent as against 1.50 per cent and 1.20 per cent on Monday.
Global markets: Yen falls
The yen deflated to close at $109.51 since global funds bought dollars and sold the yen. The euro and the pound closed at $1.4714 and $1.9760.
Recently in meeting with CEOs of state-owned banks, finance minister P Chidambaram had told them that often bankers have been quoting in the media speaking about their acquisition and expansion plans. A banker who attended the meeting told that the bank chiefs have been told, as the government is the major shareholder, banks must get their plans approved by the government before making any public announcements. According to bankers, the comment from FM’s side had come because of recent developments.
In the recent case, SK Goel, chairman and managing director of Kolkata-based UCO Bank, had told the media that UCO will not acquire any banks, but will be merging with some other bank in three months. Indeed, several bank CEOs have quoted in the media about bank acquisition plans either in overseas or local markets.
Whereas some bank chiefs also have expressed their plans of counterfeit alliances with foreign partners in the asset management and insurance business. At the meeting convened by the finance ministry the warning to bankers formed part of the introductory remarks made by the FM to bank chiefs. The meeting was convened to review the six-monthly performance of banks in Delhi last week. The government’s equity holdings in state-owned banks range from 51% to 100 % in 28 such banks.
Bankers understood the FM’s message as an attempt to indicate that the “key shareholder has the right to know about the plans of banks as first-hand information rather than learning about it through the media”.
“Also, the FM may be trying to convey that there are so many announcements by bank chiefs without much action. It would be better if banks get the plan approved and implement it immediately,” said another banker. Sensitivity of the statements made by the bankers becomes point of worry as effect can be seen on account of sharp stock price movements.
Bankers said that while, at one point the government is talking about granting autonomy to state-owned banks, on the other hand, it is resorting to micro-management. This is most obvious in the fact that the FM himself urged banks to cut interest rates.
“Going by corporate governance norms, the government has its nominee on the board and as far as the board is kept informed it should be enough. There is no need to inform individual shareholder, be it a minority or a majority shareholder. Unfortunately, under the banking legislation, CMDs and EDs are appointed not by the board, but the government. And thus, the government emerges as the power centre,” said Hemindra Hazari, head of equity research, Karvy Stock Broking.
By the way, none of the banks that have expressed their plans to acquire a bank in the domestic market have obtained the approval from their boards. While within days of the warning from the government, the CMD of a large Bangalore-based bank quoted in public about the banks plan of acquisition possibility. The bank chief had added that he expects some action to take place this year.
Tuesday, January 8, 2008
Speaking on the occasion A.R. Nagappan said around 300 branches are in the process of up gradation and hooked to the CBS network. He further added “We are also planning to unveil a number of new products through multi-level delivery systems. We will shortly introduce mobile banking facility as well.” Bank DGM (Regional Office) C.J. Chacko, stated that this would be the 64th branch in the Coimbatore region to be brought under CBS. He said, “We will be adding 5 more ATMs soon.” Chacko told the total business in this region is of the order of Rs 2,400 crore.
Monday, January 7, 2008
In October last year the instructions were issued in this regard by the department of financial services, merely 19 banks have drafted a plan to achieve the target by March 2010.
By the starting of January 1, the country’s largest lender, the State Bank of India (SBI), had neither prepared any plan nor appointed a nodal officer to exclusively look into the problems of the minorities and ensure smooth credit flow to them.
Likewise, six other banks have yet to respond to the department’s query on the steps being taken to open more branches in 121 minority-concentrated districts. Five more banks are yet to respond to the department on the steps being taken to increase credit access to the minorities in these 121 districts.
Correspondingly, 21 public sector banks are to respond on the steps so far taken to create awareness of credit access to the minorities in the selected districts.
In the meantime, the ministry has asked the Reserve Bank of India to open a website to displaying data on credit given to the minorities.
Leading banks of the districts have been asked to supervise disposal of loan applications received from the minorities and provide reasons for rejections on a quarterly basis on the website.
The department has instructed the banks to set up special minority cells and designate a nodal officer to look after the problems of the minority communities.
It had also asked the banks to prepare handbook laying down specific state-wise annual targets over a period of three years to make sure that the overall level of priority sector lending to the minority communities is raised from the current level of 9 per cent to 15 per cent in 2009-10.
This type of robbery is one of the most shocking organised looting in the history of the state and an eye-opener to the serious lapses in the security system in many banks. This has also brought to light the poor measures being followed in safeguarding gold and cash in most of the medium and small-scale financial institutions in the state.
Though some of the leading private banks are already having state-of-the-art security systems, but some of the government-owned financial institutions and private money lending firms are having very weak security arrangements.
Kerala State Financial Enterprises having about 270 branches is run by state. All sorts of banking activities are carried. Only 50 branches have a strong room and the other branches are equipped only with lockers.
Security alarms have been installed only in three or four branches, which are also not in proper working condition. According to high sources at the KSFE there is no security personnel at any of the branches.
The Muthoot Fin Corp another big financial institute have strong rooms built according to RBI norms in all its 510 branches. All the branches also have security alarms systems and round-the-clock security personnel.
According to its Chief Security Officer Abraham Koshy the bank is at the present planning to install 24-hour video surveillance system at all the branches.
The senior manager of the bank Sasikumar of the State Cooperative Bank told that the bank is having a fool proof security system with strong rooms constructed as per RBI specifications and security alarms in all its branches.
A safe-locker is the only security measure being used by most of the private banks (money lenders) which also do brisk business. However, many banks have insurance protection, an extensive portion of the transactions is done off the records to evade tax and otherwise it would not get insurance coverage.
RBI has specified various security measures for all financial and banking institutions, even specified the composition of the mixture used for constructing of strong rooms and thickness of the walls including the bottom and roof.
But there is no proper mechanism to ensure that these norms are followed. Every major bank has security committees which constantly evaluate the security measures.
According to specialists of the field, security systems can be installed at a cost ranging from Rs 7,000 to Rs 30,000 depending upon the features.
Now day’s various advance security system are like intrusion sensors, door sensors, glass break sensors, movement sensors and video recorders are available.
Auto-dealer facility capable of making telephone calls to specified telephone numbers and conveying the pre-programmed messages are also common features of the security systems.
In auto-dealer usually the phone numbers of nearby police stations and bank officials will be specified in the system so that they are alerted immediately on the event of any robbery attempts, said John Kuriakose who is a dealer of security systems.
He said the security systems work on inbuilt batteries so that it will work even in case of power failure. More over, the alarm would sound even if there is any attempt to tamper it, he said.
Friday, January 4, 2008
In his speech Dr. Joseph stated that the 200th ATM centre, was planned to be opened before March 31, 2008, and has been inaugurated three months ahead of the scheduled date. At present the bank have a CBS network of 487 branches and 27 extension counters. The 500th CBS branch will be opened in New Delhi in March 2008.
For the fiscal year the bank had a corporate business target of Rs.25,000 crore in total business but the bank has already exceeded Rs.24,000 crore.
The bank has also crossed Rs.14,288 crore in deposit against the quarterly target of Rs.13,856 crore and in advance, Rs.10,000 crore against the target of Rs.9,605 crore.
Said Corporation Bank CMD B Sambamurthy: “So far as we are concerned, the alliance is on.” The alliance between OBC, Indian Bank and Corporation Bank — popularly known as OIC — was signed on September 15, 2006, by then bank chairmen.
The alliance was for a strategic business association in identified areas for mutual benefit. The areas relate to syndication of loans, collections of cheques, remittances and jointly sourcing of computers and ATMs. By engaging in such a partnership the banks were hoping to bolster their businesses, both asset-based and on the fee income front, in the face of stiff competition. OBC CMD Alok Misra too said that alliance was on. “However, it is not possible to derive full benefit of the alliance, because in many areas we are at loggerheads and in some areas we co-operate.”
But the senior officials of the participating banks said that though the idea was good, a lack of passion to follow the agenda of the alliance by those at the helm proved to be a snag. Frequent changing of CEOs of some of the participating banks, every time brought changes in the strategies adopted by a new bank CEO. This too affected the working of the alliance, the officials said.
In the case of OBC, CMD KN Prithviraj was replaced by Alok Misra, who earlier was the executive director of Canara Bank. And in Indian Bank, KC Chakrabarty was replaced by MS Sundera Rajan, who was earlier executive director of the same bank. While B Sambamurthy the third signatory, continues with the same bank. Similarly, in Bank of India, M Balachandran was replaced by TS Narayanasami, former CMD of Indian Overseas Bank, while MV Nair of Union Bank of India is still at the helm of affairs.
According to sources from the OIC coalition said that a partnership is working in areas like syndication of loan, collections of cheques and remittances, but it do not work when it comes to sourcing of IT related issues. “Sourcing is one of the key strength of the alliance which gave them enormous bargaining power to reduce prices from IT vendors. We do not get the same benefit now with the partnership falling apart,” said a senior bank officer.
Mr Nair said the partnership between Union Bank of India, IDFC and Bank of India is still on in areas like syndication of loans and collection of cheques.
But senior officials from Bank of India said that alliance has got separated. “It was an improbable task and nothing is happening on it,” said a senior BoI official.
Industry observers are not really surprised on seeing failure of alliances. They indicated to a similar partnership between State Bank of India and IDFC in 1998 on take-out financing, which failed to take-off.
In 2005, Power Finance Corporation tied up with 11 financial institutions and banks for a single window access of funds for power companies aimed at fast track financial closure of power project. The eleven members included LIC, Bank of Baroda, Canara Bank, Central Bank of India, Corporation Bank, Indian Overseas Bank, Jammu & Kashmir Bank, OBC, PNB, Syndicate Bank and Union Bank of India.
The announcement of the alliance between PSU banks came at a time when the finance minister P Chidambaram had called upon banks to merge in order to emerge as large global banks. The alliances was being considered as first step towards merger and it was even termed as virtual mergers.
The investment will cover a massive rise of core banking solutions (CBS), on line share trading facility, phone banking and cash management services among others.
Speaking with Business Standard, P K Gupta, chairman and managing director, UBI, said, “The main challenge in the coming year would be the application of technology for business growth.”
The bank has already started CBS in 201 branches covering 57 per cent of its business and targets to increase the number to 350 branches by the end of this fiscal and double that number by March, thus covering 90 per cent of its total business.
The bank’s implicit private network (VPN) covers 660 links (branches and regional offices) and is lined up to cover 750 links by the end of this financial year.
In August 2007 depository services were launched, soon the bank will be providing online trading of shares under a tie-up arrangement with IDBI Capital Services.
The Kolkata-based public sector bank is assured to introduce cash management services for its corporate and institutional customers. In collaboration with IIM, Calcutta it will be developing a medium-term strategic business plan.
In an attempt to communicate with the customers, the bank is ready to launch a mobile-based CRM application in partnership with Sybase 365 to deliver SMS-based inquiry services.
“All these initiatives are a part of our vision to emerge as a dynamic, techno-savy, customer-centric, progressive and financially sound bank,” said Gupta.
In the first half of this fiscal the bank’s non-interest income grew by 65 per cent to Rs 173.45 crore. The chairman stressed that, to boost this growth, the bank would continue to pull up its network for the distribution of third party products such as bank assurance, mutual funds and government business.
The bank has roped in Tata AIG Life Insurance Company as a strategic partner for its life insurance venture and launched a child insurance scheme in December 2007. “We are going to launch some exclusive products in this area,” he added.
For the meantime, the bank is making arrangements of an ATM sharing with the Indo-Nepal ATM network managed by the India-based Financial Software and System and Smart choice Technologies, Nepal.
The bank has 157 ATMs of its own. Moreover, its customers have access to more than 3,500 ATMs belonging to 12 other banks under the cash tree arrangement.
The bank has also started a disaster recovery centre at Mumbai to combat any kind of technology problems that could arise during an emergency situation.
“We are working hard to provide innovative technology solutions that would contribute to customer service,” Gupta said.
Wednesday, January 2, 2008
Speaking on the occasion of MSME entrepreneurs here on Wednesday, Indian Bank Chairman and Managing Director M.S. Sundara Rajan said, “It is a competitive world and today everyone works under just-in-time concept. We should look at the project and the beneficiary rather than their balance sheets. Timely sanction of funds is more important than the interest rate.”
At present banks are having time-bound loan scheme in place for SSI. It takes around 2-9 weeks to sanction loans ranging from Rs. 25,000 to 5 lakh.
The Chairman asked the officials to clear the loan applications as soon as possible and also assured entrepreneurs that their grievances would be looked into within 48 hours of receipt of complaint.
Stating that the bank was able to come out of the trouble mainly due to its customers, he said: “I don’t want my customers to desert Indian Bank because they failed to get credit. If they do, I will punish myself by skipping lunch for a day. I am strict about it and have informed my officials in this regard.”
The Common Processing Centre was set up on a pilot basis in Chennai for sanctioning of the loans for MSMEs has proved to be a great success. Currently bank is in the process of replicating it through the length and breadth of the country.
But the seriousness is not visible in the statement made by the finance minister in the drafted guidelines that the banking regulator, the Reserve Bank of India came up with on 30 November. Although these guidelines are open for discussion, the note and intention of the guidelines is, at best, a move by the regulator in order to protect the interests of the banking sector that has come under severe criticism for using strong-arm tactics while recovering loans.
RBI continues to believe that it’s prime responsibility to protect banks from insolvency; its discomfort in protecting the rights of the retail customer can be seen clearly from these guidelines.
The guidelines are not likely to bring the much-needed relief to those who have been at the receiving end of recovery agents. It do not have strict guidelines to protect the interests of people who have been victimized or will be under threat.
But the basic question is -- do we need fresh guidelines when a banking code is already in place that deals at length with the procedure which collection agents are required to follow? Clearly the answer is no. There is a need of proper implementation of the code that already exists, and not reams of fresh paper.
Goons’ coming to threaten and collect dues is nothing new, but the issue boiled over when Prakash Sarwankar, a Mumbai resident, committed suicide after being pushed to the wall by recovery agents and the issue hit national headlines.
Though, before these guidelines came, it was hard to find voices from the banking industry acknowledging the use of strong-arm tactics by recovery agents. It took a series of suicides for banks and the regulator to take notice and the result is these guidelines.
But these guidelines fall seriously short of expectations. What the victimized borrower expected from the regulator was strong mechanism that would have made his/her life easier. Whereas the draft guidelines advocate that banks should have a mechanism to address the grievances of borrowers. But, don’t you find contradictory to approach to the same institution for solving the problem whose agents are using these terror tactics?
RBI's steps are not very hard in case of punishment as well. For instance, if a bank is 'proven' guilty of using musclemen for recovering loans, there will be a "ban on a bank for engaging recovery agents in a particular area." There is no clarity about the proposed duration of the ban in the guidelines.
It would have been better to impose an exemplary fine of an amount that would have hurt the bank's bottom line and share price would have acted as a better restriction for other banks and also have brought faith in the average borrower about the regulator's seriousness in protecting his interests.
With the finance minister expressing his views on this subject, the day is not far when we would have the final guidelines on the issue. When they do come out, their effectiveness will rest on their implementation.
Banks have to put extra efforts to train the concerned people to prevent these rules from meeting the fate of the voluntary code. On a different note, the voluntary code is due for review in 2009. It will be interesting to note the changes that are incorporated.
However, given the manner in which measures aimed at protecting the interests of consumers are defying, there is little an average borrower can do except make sure to meet his financial obligations towards financial institutions on time and pray that he does not get to encounter unpleasant situations beyond his control midway through his loan tenure.
Unauthorized brokers, in nexus with bank officials, acquire illegal loans in the name of daily-wage laborer
On December 29 night Jamuna Das (45) committed suicide by hanging himself to a tree in front of his house in Bhadrekhi village in Jalaun district of Bundelkhand, while his family was fast asleep.
He is survived by his wife, three sons and six daughters.
The deceased wife Rajulika, Das told the reporter that her husband had received a recovery notice from Allahabad Bank (Babai branch) in the last week of July for the non-existent loan. “After the notice, he was extremely stressed,” she added.
Das’s 17-year-old son Rajpal told The Indian Express that some unidentified persons had taken the loan in his father’s name by submitting fake papers.
He also suspected that the some unauthorized brokers, networked with bank officials, had acquired illegal loans for their family persons leaving innocent villagers to face the consequences.
Rajulika told her husband ran from pillar to post to prove his innocence but the bank authorities pressurized him to ‘return’ the amount.
“He wrote to the chief minister, district magistrate, Atta police and other officials but no one helped him,” she said.
When The Indian Express reached the Allahabad Bank (Babai branch), it found that the then branch manager Sher Singh was lodged in Orai jail, with over 15 cases of loan-related frauds registered against him.
A K Srivastava station Officer, Churkhi police station, told The Indian Express that cases had been lodged under section 420, 466, 486, 479, 120(b) and the Gangster Act. “Sher Singh along with two brokers Virendra Singh and Lalji Singh were arrested from Jhansi and sent to jail on November 19, 2007,” he added.
Jalaun District Magistrate R Sampheal told The Indian Express that the administration has taken very serious note of the incident.
He said a huge racket, including bank officials, was active in the area and the police was making full efforts to identify the guilty. “I have written to the bank authorities asking them not to issue recovery notices to the villagers without proper inquiry,” he added.
He further added that anyone found involved in unauthorized recovery of loans will be booked.
Another Dalit laborer of the same village, Shyam Babu is also the victim of the bank-broker network.
Father of seven, Babu questioned, “How can the bank hand over a loan of Rs 50,000 on my land which costs hardly Rs 40,000?”
He also repeated Rajpal’s claim that corrupt bank officials have given loans to unauthorized persons in the name of poor villagers.
“I have written to Chief Minister Mayawati and senior police officers in this regard,” he added.
It does not end here only; a laborer Gangawati Kushwaha, another victim of loan fraudulent reportedly left the village to take shelter with her relatives when a few field officers of the same bank asked her to return a loan of Rs 50,000.