Friday, October 30, 2009

Banks will not sell stamp papers anymore

Now stamp papers will be available only at sub-registrar offices. Earlier nationalized banks issued stamp papers of smaller denominations and also printed the same but now selling as well as printing of stamp papers by banks will be completed stopped. The banks will only sell till they clear the stocks.

However stamp paper vending was officially stopped by banks from October. According to a letter sent to the stamps and registration department, the banks will not do fresh printing of the papers anymore.

Inspector general of registration and commissioner of stamps K R Niranjan told The Times of India, "Banks will not print stamp papers and will clear the stocks. We have made alternative arrangements to supply stamp papers at sub-registrar offices. A stamp certificate will be given for the money deposited which will act as a stamp paper till we introduce e-stamping".

After the much-hyped Telgi stamp paper scam, government authorized four banks - State Bank of Mysore, State Bank of India, State Bank of Hyderabad and Corporation Bank- to sell stamp papers in the denominations of Rs 20, Rs 50 and Rs 100. Among these banks SBM used to sell a large number of stamp papers. These stamp papers of lesser value are used for writing agreements, affidavits and mortgage deeds.

The SBM official told, the government had requested the bank to continue to print stamp papers up to March 2009 to keep e-stamping rolling. But when the implementation got delayed, the bank was asked to continue issuing stamp papers from April to June, which was later extended till September.

The printing of stamp papers is a high security risk job so the banks require three months to print the papers.

Using stolen ATM card man withdraw Rs 1.35 lakh

With the help of closed-circuit television (CCTV) installed at an ATM centre in Thuraipakkam police was able to catch the ATM card thief who withdraw Rs 1.35 lakh from a stolen card.

Shastri Nagar Crime Inspector Mathiarasu told S Geetha, a local resident living on First Main Road filed a complaint about her stolen credit card. Her husband, Shankar, is an engineer and worked in a Gangotri Thermal Plant in Jharkhand. Geetha owned a Bank of Baroda ATM card, which she lost on September 30 while returning from T Nagar to Adyar. More than 10 days had passed that she realized that she had lost her card. As on Sunday bank is closed, next day when she went to the bank, she found that Rs 1.35 lakh had been withdrawn from her account. She filed a complaint of lost credit card at the Shastri Nagar police station.

A special police team headed by Mathiarasu investigating the case found that the withdrawals have been done at ATM centers of several banks in Thuraipakkam area. The team on scrutinizing the CCTV tapes obtained from ATM centers found that at one ATM center, the thief first used his own card to withdraw Rs 300 cash before using the stolen one.

The police traced his address and picked up the suspect from Kelambakkam. During the interrogation police came to know about his details that his name was Tirupathi, aged 29, son of Krishnamurthy of Jolarpet and was working at construction site in Adyar. Police arrested him and remanded to judicial custody.

Thursday, October 29, 2009

Axis Bank centralized banking processes, increase efficiency using Polaris

Axis bank using Polaris Software's Intellect Business Process Studio (BPS) has centralized its various banking processes such as trade finance, cards and cheque truncation.

Axis Bank sources stated it has done away with MICR cheque clearing after cheque truncation process, as it was a paper-based cheque clearing process. With this the cheque processing time has reduced and operational efficiency has increased. This has also enabled in improving risk management and control.

Charanjeev Singh, vice president Information Technology, Axis Bank informed, "We carried out a detailed vendor selection process evaluating more than a few vendors and found Polaris cheque truncation solution unique and customized to Indian banking. It has rich functionality and ease of use".

According to Axis Bank sources in the beginning the Intellect BPS platform has been set up for cheque truncation in NCR region. Using this platform bank is able to process one lakh cheques a day. Also, the bank has extended the pr-built solutions, which have been provided as part of the common Intellect BPS platform, to its trade finance and credit card processing services. The application has been modified according to Axis Bank’s requirements. With the set up of trade finance solution at bank branches it has become easy to capture information.

In the back office also the same solution has been set up, to process letters of credit and trade bills for India and foreign countries. Also in the back office the set up of credit card processing solution has changed the whole process to paperless through its document management and workflow capabilities. According to bank sources the platform has made possible to streamline its processes through centralized operations across its back offices in India.

Singh said, "Polaris' Intellect BPS gave us a better perspective of business and technology in terms of the reusable framework. We recognize Polaris' domain expertise and their ability to add value to us at strategic level".

Wednesday, October 28, 2009

South Indian Bank largest service provider of NPS among 21 banks

South Indian Bank (SIB), Kerala based lender is the largest service provider of the “New Pension System” (NPS), launched by the central government amongst the 21 banks and financial institutes which have been authorized for pension and investment scheme.

The SIB through its 134 authorized branches offer this service, the bank sources informed.

V.A. Joseph, managing director and chief executive of the bank informed, “This scheme will empower subscribers to plan their retirement and pension. This is a good investment tool”.

NPS is a social security scheme and the employees falling under the age group of 18-55 are eligible for this scheme.

The scheme has been executed by the Pension Fund Regulatory and Development Authority (PFRDA).

Last week, SIB launched this service for its NRI customers and the service was launched by Oscar award winner Resul Pookutty.

SIB in the first quarter this fiscal had posted the highest ever quarterly net profit of Rs.60.11 crore as against Rs.38.62 crore reported during the same period in the last year, accounting the growth of 55.64 percent.

Recently the bank has been honored with the 10th “Financial Express” Awards for “India’s Best Banks” in the traditional banks’ category.

Monday, October 26, 2009

Banks hoping credit growth to recover in second half

The loan growth of Indian banking industry has dropped to a 12-year low, which is likely to compress the central bank’s room for maneuver during the quarterly monetary policy review. While bankers and companies on their part are saying still there are indications of trends changing.

First week of October saw slow down in loan growth by 10.8% from 29.5% a year ago as against the central bank’s estimation of 20% expansion for all of fiscal 2010.

In policy review the Reserve Bank of India (RBI) has to first look at the sluggish credit growth before taking a call on reversing its accommodative policy. If the loan growth had been in accordance to the RBI’s estimated lines then clearly there would have been a rate hike, stated economists. RBI will be making its quarterly announcement on 27 October.

Although the loan growth has been slow but banks’ investment in bonds has grown 40.9% in the past one year until October in comparison to a mere 3.2% last year the reason is the banks have bought debt with no takers for loans.

According to bankers now the credit will start picking up. M.V. Nair, chairman of the Indian Banks’ Association (IBA) pointed out the apex bankers will try to influence as firms are coming back for loans as lenders have started offering loan at “an affordable rate”.

Nair stated, “We are seeing proposals going up significantly in the past one or two months, which shows that the confidence level of the firms is increasing”.

Up till now borrowers have been complaining that banks’ have been unwilling to give loan and about their risk aversion.

“Lenders have sanctioned Rs3,200 crore to double our cement capacity to 24 million tonnes in three years and we will draw money in phases,” said Puneet Dalmia, managing director, Dalmia Cements (Bharat) Ltd, the second largest cement maker in south India.

Binani Cement Ltd is also likely to draw money from banks. The company is planning to to build a 2.5-million-tonne cement plant in Gujarat. “The lenders have sanctioned Rs400 crore and we will draw it as soon as we get the limestone licence from the government of Gujarat,” said M.K. Chattopadhaya, chief financial officer of Binani Cement.

Generally when the economy growth is slow, firms usually try to cut down their costs by cutting inventory and capital expenditure plans and this directly impacts bank loan growth. As per IBA study the cost of borrowing for firms, as a percentage of gross profit, has dropped from an average of 35% in the third quarter of fiscal 2009 to 23% in fourth quarter.

Certainly, low credit growth does not essentially points towards the weak industrial activity. On the other hand Indian firms are raising money from capital markets and through introduction of shares with institutional investors, which in turn has reduced their dependency on the banking system. According to analysts this is going to continue as long as the equity market is doing good business.

Though sanctions have been given, but companies did not move ahead with new projects between October 2008 and April this year due to global economic recovery and its effect on domestic consumption remain uncertain.

However they have started taking loans for their infrastructure projects and fresh loan applications for utilities, road and power projects are also increased.

M.D. Mallya, chairman and managing director of Bank of Baroda, “Infrastructure projects are spread over years and loans sanctioned to them are not availed in the same year. Existing projects were already availing loans sanctioned to them earlier”. “Now new sanctions are also picking up in this sector.”

Andhra Bank chief R.S. Reddy told that his bank’s credit growth was 32% in the first half and in the second half “it should increase even more.”

“Almost all of the peer public sector bank chairmen I interact with tell me that their loan growth has been at least 18%,” said K.R. Kamath, chief of Kolkata-based Allahabad Bank.

Now almost all public sector banks claim that lending to the industries is steadily moving while the foreign private banks lending process is slow.

Neeraj Swaroop, regional chief executive (India and South Asia), Standard Chartered Bank, stated his bank is one of them.

“We are going slowly on unsecured loans; this is our business model,’’ said Swaroop.

Paresh Sukthankar, executive director, HDFC Bank Ltd stated, “We are seeing a pickup in retail and corporate credit’’.

Dhanalakshmi Bank plans to launch venture capital fund & AMC biz

Dhanalakshmi Bank, Thrissur-based lender official informed that next year bank is planning to launch a venture capital fund and an asset management company (AMC).

Dhanalakshmi Bank Managing Director and CEO Amitabh Chaturvedi told reporters, "We are planning to launch our venture capital fund in the first-quarter of the next financial year while the asset management company will be floated in the last quarter of this fiscal".

He told bank is hoping to receive regulators approval for both its businesses by December.

He informed Dhanalakshmi Bank will be first floating a wholly-owned venture capital company which will launch the venture capital fund.

Chaturved told the bank has to yet finalize the business model of the venture capital fund and added that, "the initial corpus of the fund will be $150-million."

He declined to reveal any further details and said, "The AMC business would be through a joint venture with an existing player".

Dhanalakshmi Bank with an aim to establish itself to a pan-India bank from a regional bank, it is planning to re-work on its branch and ATM networks across the country.

At present the bank has a strong base in the southern part of the country, and has 207 branches which include 26 extension centers.

"We want to have a pan-India presence and hence will be opening 66 branches across the country by the end of 2009," Chaturvedi said.

Out of 66 branches, Dhanalakshmi Bank has recently opened 27 branches in states such as Rajasthan, Punjab, Uttar Pradesh, Gujarat and Andhra Pradesh, among others.

"We presently have 78 ATMs and in the next 10 days we will be launching 100 more across the country," he said.

"We are on a growth path and will create a solid institution at Dhanalakshami Bank," Chaturvedi said.

Regarding RBI's monetary policy which is to be announced later this month, he said that no major announcement is expected.

"There is enough liquidity in the system and credit has just started picking-up. I do not expect any rate change in the policy," Chaturvedi said.

Banks witness rise in disbursal of gold loans

Earlier to take loan against gold was considered as social stigma, but now this has totally disappeared. Now people consider buying gold as their savings which can be used to raise funds for meeting urgent requirements. Women especially living in cities are becoming economically independent and take active part in the decision making process thus easily give their gold ornaments to avail loan against it.

Not only the people living in urban and semi-urban areas, even the farmers and rural folk are taking loan against gold ornaments as it is a simple process in comparison to long complex and expensive procedure involved in mortgaging property to get loan.

Recently a newly married couple was spotted at the South Delhi branch of a non-banking finance company that had come to take loan against the bride’s gold ornaments for their week-long honeymoon to Mauritius, the picturesque Indian Ocean Island that lies east of Madagascar. Regarding this bride’s logic was that as she is not going to wear all of the ornaments she has received during her wedding, so they have decided to take loan against the jewelry for the trip. Both the newly-weds are well-employed therefore they will return the principle along with interest within a month of receiving their salaries.

From the above instance it is clear among the Indian middle and upper middle classes the resistance for gold is fading away also because of the record price rise of the yellow metal, which in turn has led to increase in disbursals of such loans mainly by NBFCs such as 122-year-old Kochi-based Muthoot Finance.

George Alexander Muthoot, managing director, The Muthoot Group , which claims to be the country’ s largest lender against gold stated, “Apart from the price rise, the social stigma earlier attached to gold loans has almost totally disappeared and they are now widely recognized as acceptable means of raising funds for meeting urgent requirements by all segments of society”. According to a staffer from an NBFC people thinking attached to pledging gold has changed due to Hindi film industry and serials which has inexorably portrayed women parting with their gold as a deep tragedy.

Now more and more people are taking loan against gold to finance their children’s education, particularly for meeting donation demands, which a bank will not entertain, car purchases, holiday trips or even to put up margin money for a home buy as the
tenure of such loans is typically up to three or six months.

Also taking loan against gold is more advantageous than taking personal loans as the interest rate on such loans is low (Muthoot, for instance, has a base rate of 13% while banks are known to charge PLR + 200-400 bps — a bp is one-hundredth of a percentage point — for personal loans, which could work out to as high as 15-16% on an annualized basis), non-penalty for pre-payment, hassle-free documentation and speedy disbursal of the loan.

Anil Rego, CEO of Bangalore-based financial planning firm Right Horizons says, “Borrowing against their gold jewellery is an option that individuals falling in the middle-income category are increasingly looking at”. “The primary reason is that the gold rate has shot up, and, second, they are realizing that the interest rate is lower than unsecured loans. In addition, the cash crunch arising out of the global slowdown has resulted in people considering this option.”

although NBFCs such as Muthoot and Manappuram are most popular avenues for gold loans than banks, as banks lack their gold assessing capabilities, but according to a senior PSU banker this year banks have witnessed a rise in disbursals as well as the number of accounts.

Manappuram, whose web site classifies it as the country’s largest listed and highest credit rated gold loan company, has witnessed a 15% year-on-year increase in the number of persons taking gold loans during the first six months of the current fiscal to 105,265, and a 28% increase in disbursals to Rs 2,105 crore. During the same period, Muthoot has saw a robust 75% increase in the number of persons taking gold loans at 35,000 and an 81% increase in the amount disbursed at Rs 9,091 crore.

HDFC Bank, a private lender is also actively promoting gold loans, has seen its business grow by over 60% year-on year in this segment. “There has been a change in the mindset of customers opting for gold loans with borrowers being more open to pledge their jewellery and taking loans against the same to meet their short-term financial requirements,” reiterates Biju Pillai, business head (PL, LAS, GL, Home Loans), HDFC Bank.

According to AC Mahajan, CMD, Canara Bank, “The recent spurt in the prices of gold has increased the eligible amount of loan and helped in boosting agri loans against the pledge of gold. Such loans are primarily used for composite needs of raising crop and meeting consumption needs, which are normally given by way of kissan credit card”.

The amount of loans disbursed by NBFCs such as Muthoot and banks such as HDFC bank ranged from Rs 50,000 to Rs 3-4 lakh and Rs 25,000-10 lakh respectively. Mr Muthoot while confirming said, “The higher the per gram rate the higher is the interest rate and vice versa on the advance”. In this the banks and NBFCs to be on safe side also keep a reasonable margin in the event of non-payment of interest by the borrower.

In this fiscal year through October standard gold of 99.5% purity prices has averaged Rs 14,903 per 10 gm so far, up 21% from the average rate of Rs 12,349 in the year-ago period. The rise has followed the international rate, which last week had hit a record high of $1070.40 an ounce due to a steadily weakening dollar due to the mounting deficit in the US and increased fund deployment in riskier assets across the globe in light of easy monetary policies.

Wednesday, October 21, 2009

PSUs to charge pre-payment penalties, corporates begin to refinance loans

The public sector banks have started charging pre-payment penalties, while the corporates have begun refinancing their loans. Top public sector bankers pointed out that some of the corporates are refinancing their loans via negotiating for lower rates from competing banks to cut interest costs. This has resulted into asset flight and their loan books in the second quarter have also been impacted.

Bankers told the refinancing of bank loans is done by placing non-convertible debentures and bonds with insurance companies and mutual funds at low rates. Also some of the foreign banks are also choosing top corporate debt for refinancing existing bank debts. In this financial year till now around Rs 75,000 crore has been raised through bond issues.

Out of this, only one third of the issues were of banks. The rest of the issuers are all of corporates mostly at coupons ranging from 7.5 per cent to 10.25 per cent. The top public and private corporates that had floated short term debt – of 18 month tenures – had raised funds at the low rates. While for the longer tenures the rates had remained at spreads of about 150 basis points over comparable sovereign yields for “Triple A” rated borrowers. But at these spreads also the rates were quite low than bank lending rates, however some public sector banks have been lending at discounts to the prime lending rates (BPLR) of about 11.25 per cent of as much as 100 basis points. For instance, cement major ACC’s Rs 300-crore five-year bond offering was priced at 8.45 per cent.

Bankers added the refinancing has further compounded to high liquidity within the banking system. The high liquidity was obvious from the way out to the reverse repurchase window that is currently upwards of Rs 1 lakh crore a day. Bankers told due to some “big ticket” pre-payments their earnings were getting impacted. On the other hand banks were already struggling with very low incremental credit deposit rates of barely 19 per cent.

The PSU banks do not prefer refinancing because of low ratios and the consequent drop in earnings. It has been in 2004 the PSU banks had held out the threat of pre-payment penalties.

Bankers say this time the pre-payment penalties are proposed to cut their costs. This means the penalties can be as high as two per cent of the outstanding principal. The proposed penalties will be almost equivalent to those levied by foreign and domestic private banks.

Although some PSU banks are offering concessions, includes lending rate resets, when the effective cost of working funds drop. In the last quarter banks weighted average cost was about 6.5 per cent. After a change in a net interest margin of 3 per cent, the officials say the lending rates can be around 9.5 per cent. Bankers added, in the third quarter, it is expected that the weighted average costs is likely to dip further by another 50 basis points. They said, “If there are no exits, this drop in costs will also be passed to good quality borrowers”.

Dhanalakshmi Bank slashed deposit rates up to 1%

Dhanalakshmi Bank a private sector lender has reduced its deposit rates by up to 1% across various maturities, a press release issued by bank stated.

After the revision of rates the deposit rates for a maturity period of 15-days to 45-days and 45-days to 90-days are being offered at 3 per cent as against 4 per cent and 4 per cent instead of 5 per cent.

The release stated for a maturity period of 91-days to 179-days bank has reduced the rate by 0.75 per cent from 6 to 5.25 per cent.

While for a maturity period of 180-days to less than one-year, the rate has been reduced by 0.25 per cent from 6.50 per cent to 6.25 per cent.

However for maturity periods of 3-years but less than five-years and 5-years and above up to and inclusive of 10-years the bank continue to offer the rate of 7.50 per cent and 8 per cent, respectively.

The release stated the new rates will come into effect from 12th, October, 2009.

Union Bank slows down its branch expansion plan

In last two years state-owned Union Bank of India has opened around 310 branches across the country. Since April, the bank has opened 200 branches and will be adding only a few more to its network of over 2,500 branches.

But now due to the scarcity of trained staff bank has slowed down its expansion plan, earlier bank had planned to open 500 new branches during the current fiscal.

The bank’s Chairman and Managing Director MV Nair in an interview told Business Standard, “These are difficult times. So, we want to save cost. In addition, though we are hiring, it takes time before the staff is properly trained to be posted at new branches”.

In June 2009 the bank’s operating expenses registered high at Rs 543 crore as against Rs 416 crore in June 2008 which is an increase of 35 per cent year-on-year. It is believed that the increase might be due to implementation of project Nav Nirman, this scheme was launched by Nair to place the Union Bank among the top three public sector banks by 2012.

The Union bank was one of the few banks who have plans to expand their branch network. The other banks are who plan to add more than 500 branches in 2009-10 are State Bank of India, ICICI Bank and IDBI Bank.

However these three banks are working on their expansion plans.

An IDBI Bank executive said, “Recruitments are less costly now. In addition, it is a good time to enter into property lease agreements as rates will go up soon”. IDBI Bank has planned to add 200 new branches between April and December this year, and will open the remaining branches in the fourth quarter. By the end of March, the former development financial institution had 595 branches.

ICICI Bank country’s largest private sector bank has obtained approval from the Reserve Bank of India for the opening of 580 new branches in 2009-10, is also trying to keep costs low while going ahead with its expansion plans.

The ICICI Bank sources said with the opening of new branches, bank will get current and savings account deposits or the low-cost deposits, the thrust areas identified by the new management.

To keep control on its cost bank will not be adding to its existing base of 35,000 employees. Also some of the branches are being restructured to decrease the size. According to two senior executives the size will be in accordance to the business expected from the branches. An executive informed, "For smaller centers, the area of the branch and number of staff there will be lower than what it would have been in the larger centers".

ICICI Bank Executive Director K Ramkumar informed, "We have transferred a lot of middle management people to go to the branch leadership areas with their number being 350-450. This will result in our branches being manned by reasonably senior people".