Thursday, September 17, 2009

IDBI will open 10 new branches in Orissa by end of 2009-10

By the end of 2009-10 fiscal year the Industrial Development Bank of India (IDBI) plans to open 10 new branches in Orissa this was informed by Arun Kumar Panda, Deputy General Manager of the bank during the inauguration of the 11th branch of IDBI Bank at Talcher.

He said the new branches to be opened will be over and above the existing 11 branches of IDBI in the state.

The branch was inaugurated by PR Das, Chairman of the Orissa State Financial Corporation (OSFC). Panda said, “The IDBI may also set up a branch at Angul soon”. He told out of the 10 branches proposed to be set up, four of then will be opened by the end of this month while the other six branches will be opened later.

Banks buy govt. bonds due to weak loan growth

Since July the demand for bank credit has subdued and till August it has remained flat. Seeing this and left with no other alternative investments banks are purchasing government bonds and in few months there has been increase in the process.

As per the figures released by the Reserve Bank of India (RBI) in August the non-food has grown by only Rs 330 crore, which includes loans to farmers, individuals as well as businesses, but the credit given to the Food Corporation of India (FCL) for grain procurement.

The loans given to FCL are termed as food credit, which accounts for another Rs 220 crore. Thus as on August 28, bank total outstanding accounted to Rs 28,07,582 crore which is an increase of Rs 5,612 crore over the previous fortnight. Although the fortnightly increase is sharp but it has helped in balancing the dip in previous 15 days. On current levels, the annual year-on-year (y-o-y) growth stands at 14.09%, which is much lower than RBI’s comfort level.

However as on August 28 the bank investments in government and other approved securities amounted to Rs 13,69,461.21 crore increased by Rs 23,267 crore over the previous fortnight’s levels and up by 33,860 crore over the July-end levels. Staurt Davis, CEO India, HSBC speaking on the sidelines of a FICCI-IBA seminar, said, “At the moment, loan growth is still relatively modest. Companies are ensuring that their balance sheet is in order. At this stage of the business cycle, normally cash position is harder.”

While Bank of Baroda chairman and managing director, MD Mallya said a pick-up can be expected in the retail loan in the forthcoming festive season. He stated, “Besides, one normally sees a credit pick-up in the busy season beginning October. Another factor is that banks have seen a huge growth in sanctions and one could see these sanctions being availed in the second half. With the signs of industrial revival, there could be an additional demand for credit”.

Mr Davis pointed out that HSBC loan book growth is much dependent on the ratio of recovery in the US, the UK and Europe as it propels the export market worldwide. However some of the banks at individual levels, especially the public sector banks have witnessed their loan book grow include the State Bank of India, Union Bank, Canara Bank and Bank of Baroda, among others. Some of the banks loan book has grown due to increase in demand from the retail sector, and other saw growth in loan book due to strong demand from infrastructure and other core sectors. While for some it was due to combination of both. Therefore the total deposits organized by banks accounted to Rs 40,81,669 crore as on August 28, which is up by Rs 21,616 crore over the previous fortnight’s levels.

Thus the deposit demand was up by Rs 319 crore, and the term deposits grew by Rs 17,897 crore.

Thursday, September 10, 2009

Banks opting for short term loans

Banks in view of uncertainty conditions on interest rates and competition, are lending for the short term and are also introducing interest rate reset clauses to as early as three months.

At present there is low credit demand therefore companies are getting into practice of getting a loan sanctioned from big banks such as State Bank of India, and using this to strike for better deal from another bank, mainly smaller public sector and private banks. Due to this the major banks have decided to give short-term loans.

A senior executive with a public sector bank pointed out, “The ticket size is small because there is little demand for the loans for capital expenditure. So, there is little choice but to give short-term loans or put in other clauses”.

Normally banks reset interest rates after a year, but now they are working on the option of as early as three months, although in some cases the review of the rate is done after six or nine months, the executive director of a mid-sized public sector bank informed.

In the recent months up to August 15, 2009 there has been drop in the credit demand moreover in the same period last year the growth rate has declined to 15 per cent from nearly 25 per cent.

Simultaneously, banks are full with liquidity but have less option of lending as the Reserve Bank of India (RBI) is offering only 3.25 per cent under the reverse repo window which banks used to draw out excess liquidity.

Up till now on a regular basis, since the last five months, banks have been investing over Rs 1,00,000 crore with RBI.

It was also expected that the record government borrowing, accounting at Rs 4,51,000 crore for the current financial year, is going to put pressure on the corporate sector’s fund-raising plans, on the other hand companies have not been lining up capital expenditure because they have surplus capacity. Due to which the interest rates have remained soft.

Further with inflation expected to rise due to a low base effect and a rise in commodity prices, interest rates are expected to get harden. Bankers are expecting RBI to reverse its soft rate regime favoritism as soon as the growth picks up. “Bankers are unable to assess when the bias would change and therefore they are resorting to these methods,” a senior executive at a European financial services major informed.

Another bank executive stated, “There will be a problem if the reset clause is invoked only after two or three years. It is better for the banks to have the set clause every three or six months. Resets should take place more quickly as interest rates will harden in six to nine months”.

Another banker pointed out 80 to 85 per cent of his bank’s lending is linked to the benchmark prime lending rate (BPLR). In case there is increase in BPLR the interest rate on a loan will also go up. However the government is insisting on ensuring a low rate regime, thus banks are not keen in using BPLR as the only benchmark.

IDBI, Union Bank to enter into asset management biz

The two state-run banks Union Bank and IDBI Bank are planning to expand their operations therefore they are venturing into asset management business and for this they have applied for the approval from market regulator SEBI.

IDBI Bank had applied for license in January this year while Union Bank of India submitted its application with the regulator in February.

According to official sources all these proposals are in the final stage of clearance.

The banks are expected to get license in the course of year and after getting the approval they can start asset management informed sources.

On the other hand Axis Bank country’s third largest private sector lender has already received the approval from the regulator to start asset management business.

The Union Bank of India will be setting up an asset management firm with KBC Group of Belgium. In this joint venture the Union Bank will own 51 per cent stake and is expected to start operations in the current fiscal.

However the IDBI Bank has got the broad approval for the setting up of the asset management company either as a wholly-owned subsidiary or as a joint venture.

At present there are five mutual funds including Baroda Pioneer Mutual Fund, Canara Robeco Mutual Fund, ICICI Prudential Mutual Fund, Principal Mutual Fund and SBI Mutual Fund either fully or partly owned by Indian banks in the partnership with foreign companies.

By the end of July the combined average AUM of the 30 fund houses amounted to Rs 5,38,736.43 crore, the monthly AUM figures of many fund houses were not available.

Last month, an increase of nearly five per cent to Rs 6,70,936.61 crore was seen in the total average AUM of 35 fund houses as per the data available on the website of the Association of Mutual Fund of India (AMFI).

In July an increase in the average AUM of fund houses was observed included Canara Robeco MF, Deutsche MF, IDFC MF, Religare MF and LIC MF.

While an additions of Rs 5,168.20 crore was seen in some of the fund houses like HDFC MF assets under management (AAUM), while ICICI Prudential MF's AUMs witnessed a growth of Rs 3,159.09 crore in July.

Wednesday, September 2, 2009

PNB to open 218 ATMs in Delhi by 2010

Punjab National Bank (PNB) country’s leading public sector bank by March 2010, it will be setting up 218 automated teller machines (ATMs) across the Delhi. Out of 218, bank will install 11 ATMs at various metro stations.

R K Dubey, PNB General Manager (Delhi Circle) informed, ''We plan to cross the figure of 550 ATMs in Delhi by the end of current financial year''.

The bank has recently set up seven ATMs, after this the total number of PNB’s ATMs in Delhi has increased to 332. From these seven ATMs, five have been installed at different metro stations.

He said, ''For the convenience of general public commuting in metro trains, PNB has opened 31 ATMs in different stations and is going to open another 11 ATMs at metro stations very shortly.''

He informed, for the convenience of commuters 12 ATMs have been opened at different Northern Railway Stations in Delhi.

I-T return facility launched officially at Corp Bank ATM

Corporation Bank has become the first bank in the banking industry to accept income tax through its 1,035 plus ATMs. Ashok Chawla, finance secretary, ministry of finance formally launched this facility in New Delhi. During the launch S S N Moorthy, chairman, central board of direct taxes, New Delhi, J M Garg, chairman and MD, Asit Pal, executive director and the general managers of the bank were also present.

At present assesses for whom the provision of Section 44AB of Income Tax Act, 1961 is applicable are paying their taxes online. Besides these, there are approximately around 20 million individual income tax payers in India. This initiative has been taken with an aim to provide convenience service to those who at present are paying taxes through challans.

On the other hand the CorpBank customers are first required to register at their branch to avail this facility. Therefore due to some reason the tax amount can not be credited, the transaction amount will be re-credited to customers account immediately. The bank will send SMS to all the customers. The taxpayer will also receive email containing tax paid details and the receipt on payment of his tax in the ATM.