Thursday, December 31, 2009

Mobile banking a convenient medium for banking transaction

Almost all the public sector banks and private sector banks are offering mobile banking services this has also helped the banks to attract more customer. On the other hand the customers find mobile banking convenient.

There have been instances where mobile banking has proved to be the convenient medium for information. In one such instance Mr N. Ramesh, a staffer of Infosys received the SMS - “Your account is debited by Rs 15,000.” Bank timely action saved N. Ramesh from losing Rs 2.5 lakh in his ICICI Bank account. One of his servants has fraudulently used his debit card.

In another incidence Mr H.V. Murthy, would have transferred Rs 5,000 to his son's account who study in BITS, Pilani- Goa campus, but he got held up on the highway on his way to Visakhapatnam due to the Telangana trouble.

In such type of incidence mobile banking has been very useful in saving money of the bank customers, as banks alerted their customers on time which saved them from losing their money.

In India around thirty-two banks have got approval for offering mobile banking services, out of these 21 banks have started offering these services.

The banks who have initiated these services are mostly private banks and these banks are in the process of introducing new technologies to improve services, on the other hand some of the public sector banks have started following the private banks.

The Reserve Bank of India is also encouraging the general public to use mobile banking services in view of this, to boost these offering, the RBI has few days back increased the cap on daily mobile transactions to Rs 50,000 from the earlier limit of Rs 5,000.

A spokesperson from ICICI Bank told Business Line, “We have witnessed an increasing trend of customers registering for mobile banking.” In 2003 bank had launched mobile banking facility for its customers and since then it has been offering various mobile banking options, now eight million customers have registered for mobile banking services.

ICICI Bank has various options, from simple SMS alerts to a rich client-based application, iMobile, through which customers can practically do all Internet banking transactions using mobile phones. The spokesperson informed, “We would like to enhance the number of transactional services to make mobile a main banking channel for customers.”

Mr. Sanjeev Patel, EVP & Head, Direct Banking channels, HDFC Bank informed HDFC Bank customers carry out both types of financial transactions fund transfers and merchants payments. Thus both type of financial transactions done stands to equal. He said, “The balance enquiry and mini statement constitute 98 per cent of the non-financial Mobile Banking transactions.”

He stated, HDFC Bank has over five million registered users and it will continue to introduce new services such as banking for unbanked/rural customer, secure online payments using ‘card on mobile', etc, apart from extending the existing services under NetBanking suite on the mobile.

Now public sector banks (PSBs) have started looking at this as a value addition to their services. Amongst PSBs State Bank of India is the first one to introduce mobile banking facility and has seen a sharp increase in customers registering for mobile banking. Last fiscal there were around 6,000 bank customers using mobile banking services.

By September bank’s mobile banking using customer base increased to over 51,000. Bank witnessed increase in the number of transactions also it increased from about 68,000 to over 5.5 lakh during the same period. Mr Shiva Kumar, Chief General Manager, SBI, Hyderabad, informed, “It is growing because of inherent advantages.”

A senior official of Allahabad Bank pointed out many of the public sector banks are focusing on rural customers and large number of rural customers are not aware about mobile banking services this could be reason behind the slow growth of these banks.

Recently, while speaking at the India Telecom conference earlier this month, Dr K.C. Chakraborty, Deputy Governor of RBI said, “We recognize that mobile phone can be an important mode for propagation of financial inclusion in the country. The coverage of mobile phones and the use of such instruments by all section of the population can be exploited for extending financial services to the excluded populations.”

He also pointed out that banks are mostly setting eyes on high net worth customers who book their airline tickets and do large ticket transactions through mobile banking. He asked, “Why are banks not facilitating low value transactions”? He said now banks should take up a challenge to encourage low value transactions through these services.

Tuesday, December 29, 2009

Axis Bank & Honda Siel Cars inked MoU for vehicle finance

A memorandum of understanding was inked between Axis Bank, a private lender and a car manufacturer Honda Siel Cars India. Under this agreement bank will provide vehicle finance to dealers of Honda Siel.

The car maker in a statement said as per the agreement Axis bank is one of the preferred financier of Honda Siel Cars India (HSCI).

HSCI Director (Marketing) T Natsume informed, "With this tie-up Honda Siel and Axis Bank have agreed to pool their resources together to make accessible organized finance at competitive rates to our dealers and customers across the country for purchase of Honda cars."

Axis Bank has also agreed to provide finance to the dealers of Honda Siel on their vehicle stock as well as provide retail finance for auto loans.

Expressing views on the MoU, Axis Bank executive director (Retail Banking, SME and Agri) SK Chakrabarti said, "This agreement will further give us the opportunity to provide our customers more value added services at competitive rates and expose them to our various offerings. This partnership with Honda Siel will benefit the Honda Siel dealers' network as well as the retail auto loan customers."

Axis Bank has a network of 938 branches widespread across 583 cities all over India.

Monday, December 28, 2009

Still some banks are reluctant in giving education loans

In Thiruvananthapuram some of the banks have been reluctant in disbursing education loans even though government had instructed banks not to refuse education loan to any deserving child, and this is creating problems in inter-bank relations in some centers in the State. The matter was raised in a note circulated for discussion at the latest meeting of the State Level Bankers’ Committee (SLBC).

As per existing norms the bank branch situated nearest to the permanent residence of the applicant has to sanction the education loan. But the question of proximity has created confusion amongst the bank branches where in places many bank branches exist.

According to note the unwillingness shown by many banks in giving education loans is putting deserving candidates in to problem they have to run from one bank to the other. On the other hand the banks which are willing to give loan to students are flooded with loan applications and also have to take up application of those students who are coming from areas close to the branches of the ‘reluctant’ banks.

The note added due to this unhealthy relationship is getting created between banks, besides inconvenience the students are facing in getting education loans.

This issue brought in to notice of SLBC by the Lead Bank Manager of Ernakulam district, and has requested SLBC to issue specific guidelines in this matter to remove confusions in sanctioning education loans.

The note also stated even the rate of interest charged on education loans vary from bank to bank. Generally nationalized banks charge a lower rate of interest than private sector banks. Thus deserving candidates are forced to go in for high-interest education loans because they are staying closer to bank branches charging high interest rates.

The note has requested to provide rationalized interest rate on education loans to overcome this problem.

After the guidelines were issued by the Indian Bankers’ Association (IBA) earlier, some of the banks have reduced the amount of education loans for nursing students. This is also the reason for student’s agitation against some of the banks. At this the IBA, re-looked into the matter and allowed the banks to follow the fee structure approved by various State governments. Though some of the banks have to still issue the appropriate guidelines to their branches in this regard, the note said.

Monday, December 7, 2009

Karur Vysya Bank in the top league for its efficiency and financial strength

Karur Vysya Bank is a smallest bank in India with a market cap of just over Rs 2,000 crore is positioned in the top league due to its efficiency and financial strength. The bank mainly operates in South India. But now it is expanding its reach in other parts of the country. By the end of FY 2009 there were around 312 branches. Recently bank has a proposal to open more branches and take the total number of branches to 350 by the end of current financial year. The bank is expanding its branch network speedily and this will help the bank in increasing its base of low current account and savings account deposits, which will help in decreasing the cost of funds.

According to recent study conducted by ET Intelligence Group, Karur Vysya Bank is positioned among the 10 top banks in three of the four main parameters. As per financial strength the bank is positioned at 4th place 6th on efficiency and 7th in terms of shareholder's return. Bank is fundamentally strong as well as good in terms of rewarding its shareholders.

Banks net interest margin (NIM) is reported to be in excess of 3% in the last nine financial years. Only few of Indian Banks have been able to achieve this feat. The Indian Banks average return on assets (RoA) stood at 1% in FY 2009, whereas Karur Vysya Bank has posted 1.5% RoA, which means the bank positioned very high in regard to utilization of its assets.

Moreover banks net non-performing assets (NPA) stood at 0.25% of net advances at the end of FY 2009 which shows bank performs well on the quality of the assets also. There are only three banks - Punjab National Bank, Andhra Bank and Indian Bank which have reported better asset quality than Karur Vysya Bank. In FY 2010, the asset quality has further improved as net NPA was just 0.22% of net advances at the end of Sept'09 quarter.

Thus the bank’s performance has been praiseworthy in the current fiscal. Its loan book has grown much faster than the other banks in the industry. By the end of Sept'09 year-on-year basis its loan book had grown by 23.2% as against of just 13% growth in the gross bank’s credit in the same period.

The more praiseworthy fact is its net interest income has increased by 28.6% y-o-y in the six months ending Sept'09. Interest expense is deducted from interest earned to calculate net interest income. Last year when interest rates had moved up banks spreads had shrink, due to which most of the banks up till now, had reported flat net interest income in this fiscal. In such condition, Karur Vysya Bank 29% growth in net interest income shows its buoyancy in tough times, which in turn has helped it in protecting its spreads. However bank has reported 74% growth in its profits in the first half of the current fiscal.

Even more praiseworthy is the fact that its net interest income has grown by 28.6% yo-y in the six months ending Sept'09. Net interest income is calculated by deducting interest expense from interest earned. As interest rate shot up last year, banks witnessed shrinkage in spreads. As a result, most of the banks have reported flat net interest income in this fiscal so far. In such a situation, 29% growth in net interest income shows Karur Vysya Bank's resilience in tough times, which has helped it in protecting its spreads. The bank posted 74% growth in its profits in the first half of the current fiscal.

Currently bank stock is trading at 1.5 times its book value which is close to all-time high valuations. Also at current prices its dividend yield amounts at 3.2%. Therefore the conservative investors can invest in this stock to earn profit. Bank’s valuations are in comparison to its peers like Federal Bank, City Union Bank and South Indian Bank. Moreover its dividend yield is highest among its peers. From this valuation it becomes clear that Karur Vysya Bank provides unique combination of reasonable valuations, high dividend yield and growth potential.

Kotak Bank appears as a leading private sector bank in India

Kotak Mahindra Bank a new generation bank has become of the leading players in the private banking sector in India. In the interview given to ET NOW, C Jayaram, executive director of Kotak Mahindra Bank for the first time revealed its assets under management and said, “We have emerged as one of the leading players in the industry with assets under management in the range of Rs 13,000 crore.”

An anonymous senior official working with a foreign bank said, “Assets under management of Rs 13,000 crore will surely put Kotak in the top two, if not the number one player in the space”.

Mostly private banks very rarely disclose information about their assets under management, but players like DSP Merrill Lynch, Deutsche Bank and Kotak Mahindra Bank have always been recognized as key players in this segment. But, both DSP Merrill Lynch and Deutsche Bank do not disclose their assets under management as a matter of policy.

Kotak Mahindra Bank categorizes its private banking clients, as individuals having capacity to invest surplus of over Rs 5 crore (or $1 million). The same trend is followed by other banks also.

Mr Jayaram said in the past year also, Kotak’s client base in the private banking business was quite big and the at present bank is having a clientele base of 1,500 from net worth families. He added, “There is a large base of HNIs in the country. This has been rising and will be on the rise. There are more people being added to the universe every year, and it’s a function of the way India is progressing”.

In the next few years bank will be looking for expansion of their business in the private banking sector.

On the other hand wealth managers believe Indian HNIs are searching for alternate asset classes.

Mr Jayaram said, “Initially, this was a space where there were very few asset classes. But the new generation of HNIs is moving away from just equity and fixed income into other asset classes like real estate, commodities, private equity and structured products”.

He also believes that newer and younger HNIs are ready for aggressive expansion into new asset classes, to get higher returns. According to geographical location these banks get largest clientele base of HNIs from Mumbai, Delhi and Bangalore.

Thursday, December 3, 2009

UCO Bank gets approval to open 82 new branches

The Reserve Bank of India (RBI) has given approval to state owned lender UCO Bank to open 82 new branches across the country by the end of this financial year. At a customer’s meet Chairman and Managing Director SK Goel said, “These branches will be in addition to the 2,078 branches which UCO Bank has at present”. The bank has also drafted a plan for the renovation of its 400 branches.

Goel stated, “We are going for a makeover of our branches in rural areas. The bank aims to offer an ambience which will make our rural customers feel at home”.

He also resolved financial inclusion in Himachal Pradesh and Orissa, in these states bank has the lead responsibility. Goel told bank has achieved 100 per cent financial inclusion in Himachal Pradesh.

He said the RBI had set up an independent agency to check the genuineness of the claims made by UCO regarding financial inclusion in Himachal Pradesh.

While in Orissa, Goel informed in 13 districts of the state bank has achieved 100 per cent financial inclusion.

He added, “We are aiming to make Orissa the second state in the country to achieve 100 per cent financial inclusion and we want this to happen as soon as possible.”

As per agency’s reports, in Himachal Pradesh has achieved 99.4% financial inclusion and the people left out in the state are the migrants who had come to the state for a short duration, he said.