Thursday, August 21, 2008

Core banking a challenge and solution for banks to changing needs

Today banking industry has achieved more scope on the technology front than ever before. Earlier banks were just business enabler; IT is now a business driver for the banking sector. With the help of IT banks have been able to implement Core Banking Solutions (CBS). CBS is an automation of banks across multiple delivery channels. Under CBS banks are able to achieve a centralized processing mechanism and in turn provide an ‘anytime anywhere’ service to their customers. However, core banking applications have a set of challenges as well.

With an increasing competition and changing market dynamics, banks have been forced upon to keep updated themselves for newer obstacles every now and then. Besides this fresh regulations and compliance requirements, industry consolidation, delivering cost effective products and services, maintaining secure data platforms, meeting ever increasing customer demands and other strategic issues, all these factors have made banking far more complex than it used to be in the past. Therefore to handle the increasing transaction volumes and do away with issues hanging around the current systems, banks require the right CBS in place.

Banking industry is getting globalize therefore banks need flexible, customer centric core banking environment which should be equipped with multi-currency and multi-lingual features. For instance, Canara Bank recently implemented CBS at as many as 1000 branches, which is one of the largest implementations in the banking industry and has included agricultural loans, loan processing, foreign exchange and service branch functionality. This step has helped the bank to move in line with the changing market scenario.

Currently, out of the total IT spending taken on by banks, about 75 per cent go toward maintenance of existing systems and certain that the business of the bank goes through smoothly. Therefore, a major amount of expenditure involved in upgrading core banking architecture is something many banks may not be able to afford at present. To gain a periphery over their competitors and attend to customer demands effectively, banks are required to take balanced steps by replacing old systems with new platforms, without giving up on existing core banking modules which may still cater to changing needs. Although considerable progress in CBS implementation by banks has taken place but there is much more ground left to be covered.

Wednesday, August 20, 2008

Indian banks show better growth in loan segment than last year

Replying to the question on interest rate, whether growth in loans sector has gone down with the hike in interest rates the Reserve Bank of India (RBI) deputy governor V. Leeladhar said growth in loans by Indian banks has been better as compared to the last year.

He said the credit growth has been healthy although the pace of retail lending has slightly slowed down, he added that farm loans are expected to pick up.

"The growth of advances is far better than what it was last year. Something like 26 per cent against 20 per cent, which we have been projecting," he said in Bangalore.

In July RBI raised its key lending rate to a seven-year high of 9 per cent to control in double-digit inflation.

He said due to higher rates credit growth might slow down, though that could not yet be determined.

According to RBI data loans disbursed by Indian banks as at Aug 1 were 25.8 per cent which is higher than a year earlier.

On being asked whether banking sector reforms to allow foreign competitors to buy local banks will be unveiled next year, Leeladhar in a reply said it will all depend on the review.

He added, "I can't foresee what will be the findings of the review".

Tuesday, August 19, 2008

Banks raise fees to keep bottom line growing

Banks have started raising the charges of fee-based products to keep the end result growing. Banks are raising fees of usage of ATM & credit card facility, locker services, demand draft (DD), cheque issue and internet banking facilities. Banks are raising charges fearing about slowdown in growth and profitability due to high borrowing costs.

ICICI bank country’s largest private sector lender and Bank of India (BoI) public sector lender have already raised the rates of some of these products and it is being expected that sooner other banks will be following them. For some of these products the fees has been increased by up to 50%, while many free services will now become charged services. You may get details of updated rates for ICICI home loan here and also all the important documents needed to get approval fast.

ICICI bank official said, “We have to raise the charges to keep up with the quality of services we provide”. Official said the hike will be applicable for both — Indian and NRI customers.

The charges raised for the services by ICICI Bank include issuing of cheque books, demand draft and cheque collecting facilities while increasing the penalty for return of cheque due to financial or non-financial (technical) reasons. From now consumers will have to pay for even irresponsible use of their debit card as ICICI Bank will be slapping a penalty if there is rejection of transaction at any ATM.

Bank will be also charging Rs 100 as penalty for de-hotlisting of cards (getting the card unblocked). On premature closure of an account, it will be charging a fine of Rs 500 instead of the previous charge of Rs 250. Bank will be taking charges from consumers for issuing of new user-ID and PIN for internet banking usage.

On the other hand Bank of India has revised the locker charges in addition to the charges for other services. “We have revised the service charges with effect from August 14 and the details will be available soon,” Bank of India CMD T Narayanswamy told ET. He added that the fees has been raised selectively and not “across the board.”

Commercial banks are making efforts to maintain their profits, after the recent hikes in key policy rates by RBI. The net interest margins (NIM) is falling down due to high cost of borrowing. Due to this increasing pressure, most of the banks have reported a single-digit growth in net profit for the first quarter of the current fiscal. It is being considered the high rate scenario is going to persist as there are no chances of RBI to relax the monetary measures in the near future.

Thursday, August 14, 2008

SIB launched S. B. account for NRI a Novel Convenience Banking Product

South Indian bank launched a premium S.B. account for NRI customers of the bank. The S.B. account was launched by Mr.M.K.Abdullah, the earliest NRI customer of the bank and Chairman of the EMKE Group (which employs more than 20000 Indians in 25 countries). At the time of launch the First Diamond Account passbook to Mr.Edwin Tharakan a prominent NRI. The function was presided by Dr.V.A.Joseph, Chairman and CEO of the Bank.

The pioneering product has value added features outlined for NRIs to make it extremely easily and comfortable. The account holder has to maintain an average balance of Rs 50,000/ only. The scheme has following features:

* Free and unlimited Any Branch Banking (ABB) facilities.

* Free and unlimited fund transfer to any other bank account in India through

RTGS and NEFT by debit to NRE accounts.

* Free and unlimited purchase of Drafts/Payment Orders by debit to NRE accounts.

* Free International ATM-cum-Debit Card for which annual maintenance charges are not collected.

* Free withdrawal of cash through other Banks’ ATMs in India.

* Free fund transfer facility through Internet Banking.

* Free utility payment and e-commerce services for Internet Banking customers.

*Free SMS facility and no annual maintenance charges.

The account holders will be able to avail the facility of Banking (ABB) and can withdraw cash and deposit cheques for collection at any branch of the bank. Customers will also be able to issue ABB cheques which are payable at par at all branches of the Bank. The feature-rich Savings Bank account is available at all the 511 branches of the Bank which has set up one of the largest CORE banking branch net work in India in the private sector.

In his launch speech Mr.M.K.Abdullah stated that as a satisfied NRI client of the Bank for more than thirty years he has been satisfied with the services offered by the bank and has been observing the excited performance of SIB in the arena of NRI services .He added the he has no doubts about the popularization and acceptance of the new product by the NRIs the world over.

Presiding over the function, Dr.V A Joseph, Chairman and CEO of the Bank, stated, “South Indian Bank, being a customer – oriented Bank is striving hard to render personalized customer service using the latest technological capabilities. The technological capability of the Bank was recognized when the Bank could bag the banking technology excellence award from IDRBT which is the technical arm of RBI. The service quality of the Bank has also been recognized when the Bank was selected in the ‘Outlook Money – C Fore’ survey as the best private sector Bank in India in the service quality segment.” Dr.V A Joseph informed that Hadi Express Exchange in Dubai to which South Indian bank is providing management support has received licenses to open 3 more branches at Dubai, Abu Dhabi and Rasal Khaima. Through Hadi Express Exchange NRIs in Bur Dubai and Sharjah are already being served.

Funds remittance done through the branches of Hadi Express Exchange is credited online to the accounts of the customers within 30 minutes for which the beneficiary gets an SMS. “SIB Express”, is the online delivery channel of SIB’s NRI services has received high admiration from the customers in the Gulf who number more than 1.65 lakh. Dr Joseph also gave details of the facility recently started for online booking of offerings. The facility is being offered free of bank charges , through South Indian Bank payment gateway-the first bank to go online booking -by the customers of the bank who are devotees of Guruvayur Sreekrishna Temple which is described as the Dwaraka of South India. This facility can also be utilized by the NRIs to give offerings, hassle –free with greater transparency and security at the click of a button ,either for themselves or their aged parents .

“South Indian Bank had completed on 26.03.07 the project ‘SIBertech’ by introducing a centralized Core Banking Solution in technology partnership with Infosys Technologies when many banks had not even started implementation of CBS. SIB, which is affectionately called by NRIs as the “Bank for the Pravasis” had started this project in 2001 mainly for the convenience of the NRIs.The new product now launched would confirm this belief”, the Chairman concluded his speech.

On the occasion Mr.H.Suresh Prabhu ,Executive Director ,Mr.Cheryan Varkey,Chief General Manager,Mr.Alex Mathew, General Manager and Mr.C.J.Jose Mohan , Dy. General Manager were also present and gave the speech..

Monday, August 11, 2008

Allahabad bank hikes BPLR leave existing housing, personal loans

On Friday 8 August 2008 Allahabad bank raised its benchmark prime lending rate by 50 basis points to 14%. After the hike in bps rates, bank gained 1.40% to Rs 65.20 at 13:43 IST on BSE. The bank announced the hike during trading hours on 8 August 2008.

On the other hand BSE Sensex was losing by 103.25 points, or 0.68%, to 15,014. On BSE shares were trading at 1.09 lakh in the counter. In the past one quarter the scrip in an average daily had a volume of 2.77 lakh shares. Now updated interest rate for Allahabad Bank is available at one click so check them today.

During the day stock had gained at Rs 65.50 and downfall at Rs 62. Earlier stock had gained a 52-week high of Rs 143 on 3 January 2008 and a downfall of 52-week low of Rs 53.10 on 2 July 2008. Allahabad bank has an equity capital of Rs 446.70 crore and the face value per share is Rs 10.

The current price of Rs 65.20 discounts its Q1 June 2008 annualized EPS of Rs 8.36, by a PE multiple of 7.80.

Bank sources said the existing housing loan, personal loan; education and car/auto loan customers will not be affected with the hike in benchmark prime lending rate (BPLR). It further added that the housing loan up to 30 lakhs will not be affected by the hike in BPLR.

Earlier in Q1 June 2008 Allahabad Bank's net profit fell 53.4% to Rs 93.36 crore on 20.5% growth in operating income to Rs 1849.63 crore as compared to Q1 June 2007.

Allahabad Bank is providing treasury and banking operations including accepting deposits, lending loans and to provide other financial related services.

Government of India has a stake of 55.23% in Allahabad Bank

Wednesday, August 6, 2008

Suvarna Bank depositors to write letter to RBI for merger

Shree Suvarna Sahakari Bank depositors, account holders and members' action committee held a meeting at Sambhaji Park in which they decided to send postcards to the Reserve Bank of India (RBI) for seeking its help. In the meeting around 200 depositors were present.

In the meeting members decided to send postcards to RBI in which they will be requesting it to settle the issue once and for all by way of the merger of the bank with some other bank. In the meeting committee representative Vilas Lanke appealed to the depositors to send letters to the RBI. He told DNA that over 1,000 depositors and members and account holders will be sending letters to the RBI urging it to sort out the issue.

On September 14, 2006 RBI imposed a moratorium and suspended its board of directors after which bank has been facing a crisis.

Later on, the co-operative department appointed an administrator and an inquiry was carried out regarding the financial irregularities.

The bank had build up losses to the tune of over Rs 350 crores. Saraswat co-operative bank has given willingness to the merger after the release of Suvarna Bank's financial reports this year.

In fact there have been reports of willingness of Indian Overseas Bank (IOB) in April and May regarding the merger.

Lanke told Saraswat Co-operative Bank last fortnight had placed their plan of merger before the depositors.

He also sought clarity on media reports that the IOB was keen on acquiring the bank.

He said that the depositors consent was not taken on this issue and demanded that if at all IOB wanted the merger; they must also inform people about their plan.

Tuesday, August 5, 2008

StanChart will soon review its BPLR

A top bank official of Standard Chartered Bank informed that soon bank might be reviewing its benchmark prime lending rates (BPLR).

Earlier in late July the private lender had increased its BPLR by 1.25 per cent to 14.25 per cent. Standard Chartered Bank India Head Neeraj Swaroop told reporters that bank might review its BPLR in view of the changed environment.

Following the Reserve Bank hiking its key rates earlier this week in the last two to three days host of banks have raised their lending rates.

Swaroop further added that apex bank might go for further monetary tightening in the coming months due to the prevailing high inflation rate, which currently stands at 11.98 per cent. Swaroop added StanChart’s lending portfolio being very small, the bank has not seen any delinquencies in the corporate segment. However in consumer finance, bad loans have increased marginally.

Possibilities of impact of higher interest rates on small and medium enterprises are being seen.

Swaroop added due to high interest rates, SMEs can face pressures as they don't have a unique business model.

Giving his views on the consolidation of the Indian banking industry the StanChart official said that consolidation in the domestic banking sector should be done both within the public sector segment as well as between public and private sector banks.

Commenting on takeover of a domestic bank by a foreign one, Swaroop said, a takeover by a foreign bank is just change of ownership and it will not contribute much to the consolidation process in the system.

Monday, August 4, 2008

Union Bank Hong Kong first branch opened

Union Bank of India in a bid of opening its branches overseas opened its first branch in Hong Kong. Through its branch bank will be offering a variety of products and services to corporate and individual.

The bank is looking at the possibilities of opening branches in countries, in the geographical boundaries of Africa, Asia, Europe, North America and Oceania.

In a statement released by the bank said the overseas branch at Hong Kong and the representative office in Shanghai will help the bank to look at opportunities from the growing Indo-Chinese trade relations.

The Hong Kong branch main aim will be to target major business in wholesale banking, syndication, trade finance and other trade related businesses and retail banking.

Currently Union Bank is having representative offices at Shanghai, PRC and Abu Dhabi, UAE. Bank did total business of USD 44800 million as of Mar. 31, 2008, with an asset base of USD 30926 million.

Friday, August 1, 2008

High court direct state govt. to review its recommendation of loan against land

Jharkhand High Court passed a judgment in which it has directed the state government to make amendments in its scheme. According to the government scheme tribals of the state can mortgage to obtain loan against their property.

In its order the court has instructed the government to review its recommendation that prohibits tribals to pawn their lands to obtain personal loans. In an oral observation the court said state should certain that the interests of the tribal are protected. Court has also instructed that government should see that tribals do not mortgage their entire lands for loans as it can lead to a possibility of losing entire land for not paying up the dues.

The court gave the judgment in view of the issue raised by one Felix Tamba in public interest litigation after a government circular proposed by the land and revenue department which stated that members of Scheduled Tribes will not be able to secure loans in lieu of their land.

Tamba, a tribal, stated the circular will have a negative effect on the interests of the community. Tamba in his appeal stated that if the tribals won’t be able to secure loans by mortgaging lands, this will affect the future of tribal students.