SBI to review on rate cuts in ALCO meet

State Bank of India (SBI) Chairman O P Bhatt while indicating at interest cut in the near future notified that although several banks have cut down their rates in the recent past but these have not been done in a uniform way and across the industry.

He informed the reporters, "In the past 2-3-months, there have been some rate cuts by banks but these have not been across the industry and not uniform."

He pointed out there are possibilities that banks might cut rates around March, and added that there is enough liquidity in the system.

When asked about more cut in PLR and other interest rates by SBI, Bhatt pointed out that its "asset-liability committee (ALCO) meets every week" and would look into the matter.

Bhatt further stated, "We will factor in the policy inputs" along with other factors (while taking a decision on its rates).

He stated SBI is amongst the first banks to reduce its prime lending rate (PLR) as also its deposit rates.

He informed, "SBI reduced its deposit rates by 1.50 per cent".

Local Banks role in Satyam fraud- commit faux pas

The local banks in Andhra Pradesh have a key role in Satyam fraud. This was discovered by the Satyam fraud investigation team. The local banks have committed faux pas. This was revealed in the 2002 report of the Hyderabad office of the income-tax (I-T) department details how banks in Andhra Pradesh allowed B Ramalinga Raju and his family members to open multiple accounts with complete disregard to documentation and basic formalities. Complex transactions were done through these accounts to move money around.

Generally for opening a new account bank ask to submit a photograph, complete address proof and permanent account number (PAN). Banks also ask to bring along an “introducer” — an existing account holder. In 2002 these norms were there present. Ever since then, the norms have become stricter.

But in Raju family’s case, on the savings bank and term deposit account- opening forms of Raju’s relatives contained only the names of A Bhaskar Raju, AVL Kumari, I Mallapa Raju, Janaki Ram Raju and D Rajeshwari Devi and an address: Shyamala building, Begumpet, Hyderabad. According to report, “No photographs have been obtained. No nominees have been named. No PAN has been mentioned. There was no introduction by a person holding an account in the bank.”

Raju’s friends and relatives opened accounts in Vyasa Bank (Banjara Hills, Hyderabad), State Bank of Hyderabad (Begumpet), UTI Bank (Kakinada), HDFC Bank (Vishakhapatnam) and Karur Vyasa Bank (Vijayawada).

All these account holders had filled the customary Form 15H with the I-T department to save TDS, or tax deducted at source, on interest income. These “numerous” forms raised suspicion in the minds of the I-T investigation. These members also opened fixed deposits accounts and proprietary concerns they owned. But in the report records do not give details about the individuals and the money they held in the respective bank branches.

When the I-T department took in custody the FDs in Vyasa Bank on February 28, 2002, for instance, it discovered deposits worth more than Rs 1 crore in the name of A Bhaskara Raju and Rs 1.4 crore in the name of AVL Kumari.

Likewise, when the HDFC Vishakhapatnam branch manager was cross-examined on March 3, 2002, obtained the information about the deposits worth more than Rs 40 lakh in the name of AB Enterprises, which belonged to A Bhaskara Raju.

I-T department also recorded bank managers’ statements. The manager of Vyasa Bank, Banjara Hills, said that at the time of opening of these accounts, he was not the branch manager. He also informed the column for the name of the introducer was not filled. According to reports, “An attempt at locating the addresses indicated on the Form 15 H was made. However, none of them could be located.” During the investigations, one of the bank accounts guided to an intermediary, N Rama Raju, and this in turn led to a string of related transactions.

The reports also state that the list of mediators is not exhaustive, suggesting that if the investigation had continued; more names could have come out. I-T report which contains explosive details about money transfers and stock deals, raise questions about the purpose behind the complex layering and routing of transactions. ET had reported about the findings of the I-T report in its edition dated January 28.

RBS Group launched financial services in India

The Royal Bank of Scotland Group Plc., or RBS, after receiving approval from the Reserve Bank of India of renaming of ABN AMRO Bank NV’s non-banking finance arm as Royal Wealth function under RBS Management has launched its wealth management business in India. The wealth management business wills Financial Services.

In October 2007 RBS, the UK’s Fortis Group and Spain’s Banco Santander SA had acquired the global assets of Dutch lender ABN AMRO Holdings NV. In India, Fortis will run ABN AMRO’s asset management unit and RBS will take hold of the wholesale, retail and private banking businesses.

An ABN AMRO Bank official notified, “RBS Financial Services is planning to set up five centers across the country, of which two centers are in Mumbai. The non-banking finance arm will act as a distribution arm of the bank”. He added, “Apart from distributing wealth management products, RBS Financial Services will also sell other asset products and...enter the business of collection of non-performing assets.”

An anonymous official who was not bank’s official spokesperson told Royal Wealth Management will be launching and also be marketing in India the services and products of RBS Coutts, RBS’ global private banking arm.

On August Mint had reported that the Reserve Bank of India (RBI) had rejected RBS operating ABN AMRO’s Indian business under two separate entities: RBS and RBS Coutts. An official had then pointed out, “Coutts is a separate entity and approval. RBI for use of the brand name would effectively mean allowing a backdoor entry for a bank.”

In October former AMRO’s non-banking finance arm, ABN AMRO Securities (India) Pvt. Ltd had received the Foreign Investment Promotion Board’s consent to expand its scope of activity from a primary dealership. And in December, RBI transferred the primary dealership license—which allow a firm to trade in government securities—to ABN AMRO Bank.

V. Vasantha Kumar, senior vice-president and head of marketing and communications for ABN AMRO Bank in India, informed in an email “As part of our expansion plans we are looking at distribution of wealth products under the brand name of Royal Wealth Management and currently we have two outlets in Mumbai”. “Further details on our expansion plans will be announced shortly, once they are finalized.”

ABN AMRO was established in 1920 in India since then it has 9,000 employees in 28 branches. The lender’s resources in India have grown by 28% to Rs36,617 crore in fiscal 2008, while its net profit declined 27% to Rs280.6 crore.

On Monday, ABN AMRO reported that it will post a full-year loss from continuing operations of about €13 billion (Rs84,240) after investment-banking losses.

On the other hand RBS, which bought ABN AMRO’s investment banking business, informed it might post a loss of as much as much£28 billion (Rs2.02 trillion).

Bank of Baroda and GM India signed MOU for vehicle financing

Bank of Baroda and GM India signed an MOU according to which bank will provide wholesale financing to GM India dealers and retail financing to customers for purchase of GM India vehicles across the country. Joint promotions and schemes will be undertaken by both bank of Baroda and GM in order to offer easy finance options to the valued customers through all the branches of bank.

Bank of Baroda is the largest public sector bank in India with a network of over 2,800 branches across the country. Bank is also one of the top ranking banks of international status; since its setting up of 72 overseas branches in 22 countries covering 5 continents bank has been growing rapidly.

During the signing of the MOU Mr Slym said, "Considering the slowdown in the auto industry, this association with Bank of Baroda at this juncture is an attempt to ensure that we are able to reach out to our valued customers with easy, affordable and preferential finance options. This service initiative is another step from GM India aimed at strengthening our association with dealerships and customers nationally and to maximize our customer reach and satisfaction. With the agreement in place we plan to initiate various retail activities and road shows across the country to reach out to our valued customers," he added.

Banks try to attract customers, offer card protection schemes

There has been increase in credit card losses and even the number of credit card takers has also reduced significantly, therefore some of the banks introducing schemes that provide customers coverage of fraudulent transactions in case of loss or theft of credit and debit cards.

In India, currently two banks are offering the scheme — Citibank and Kotak Mahindra Bank in association with CPP Assistance Services Pvt Ltd, a UK-based firm. Card Protection Program (CPP) is one that assists customers by blocking all cards — debit and credit cards — in case of theft and loss, both before and after reporting. CPP also assists customers with emergency cash, travel and hotel assistance, thus taking care of all their needs in any exigency.

There is no restriction customers have the choice of signing up for any number of cards and of any bank for the program.

CPP offers two plans, a plan having an annual fee of Rs 950, customers can get coverage of up to Rs 50,000 of fraudulent transactions before notification. For Rs 1 lakh coverage, the annual fee is Rs 1,250. After the cardholder has signed up for the scheme, transactions done seven days prior to the date of reporting are covered.

If transactions take place after notification of the theft or loss, the coverage is as high as Rs 15-20 lakh.

Mr Subrat Pani, Business Head (Cards), Kotak Bank told Kotak Bank has launched the scheme as a pilot project about two weeks ago and over 1,000 of the bank’s existing cardholders have already been registered for the scheme.

He informed the bank is already offering a protection program for its Platinum and Signature credit cards.

Kotak Bank aims to have a card base of 2.5 lakh by 2009. The next step of the bank would be to cover e-commerce frauds that happen in internet transactions, Mr Pani said.

Earlier this month Citibank had launched a similar scheme. A press release having an announcement of the launch of the program had quoted Mr Sandeep Bhalla, Business Manager (Cards), Citibank India, as saying, “Regulators have strongly recommended that banks introduce a cover to take care of the liabilities arising out of lost cards, and Citicards has provided such a solution to our customer base”.

Banks try to attract customers, offer card protection schemes

There has been increase in credit card losses and even the number of credit card takers has also reduced significantly, therefore some of the banks introducing schemes that provide customers coverage of fraudulent transactions in case of loss or theft of credit and debit cards.

In India, currently two banks are offering the scheme — Citibank and Kotak Mahindra Bank in association with CPP Assistance Services Pvt Ltd, a UK-based firm. Card Protection Program (CPP) is one that assists customers by blocking all cards — debit and credit cards — in case of theft and loss, both before and after reporting. CPP also assists customers with emergency cash, travel and hotel assistance, thus taking care of all their needs in any exigency.

There is no restriction customers have the choice of signing up for any number of cards and of any bank for the program.

CPP offers two plans, a plan having an annual fee of Rs 950, customers can get coverage of up to Rs 50,000 of fraudulent transactions before notification. For Rs 1 lakh coverage, the annual fee is Rs 1,250. After the cardholder has signed up for the scheme, transactions done seven days prior to the date of reporting are covered.

If transactions take place after notification of the theft or loss, the coverage is as high as Rs 15-20 lakh.

Mr Subrat Pani, Business Head (Cards), Kotak Bank told Kotak Bank has launched the scheme as a pilot project about two weeks ago and over 1,000 of the bank’s existing cardholders have already been registered for the scheme.

He informed the bank is already offering a protection program for its Platinum and Signature credit cards.

Kotak Bank aims to have a card base of 2.5 lakh by 2009. The next step of the bank would be to cover e-commerce frauds that happen in internet transactions, Mr Pani said.

Earlier this month Citibank had launched a similar scheme. A press release having an announcement of the launch of the program had quoted Mr Sandeep Bhalla, Business Manager (Cards), Citibank India, as saying, “Regulators have strongly recommended that banks introduce a cover to take care of the liabilities arising out of lost cards, and Citicards has provided such a solution to our customer base”.

Banks intensified opening new accounts process after terror attack

After the nasty November terrorist attack in Mumbai the banks have become more strict and vigilant about the process for opening new accounts. Earlier it was not difficult to open a new bank account, just walk into a bank and could open a new account easily. While banks have been following the know your customer (KYC) guidelines issued by the Reserve Bank of India for opening new customer accounts, but now they are closely scrutinizing and verifying customer details for new accounts in wake. Banks are also closely monitoring transactions being carried out. Now the customers credentials are being checked thoroughly and the documents are being verified provided by him.

"Bankers have been instructed by the authorities concerned to be diligent and vigilant about the new customers they get into their fold, especially in cities like Delhi and Mumbai,'' said V S Reddy, managing director, Lakshmi Vilas Bank.

State Bank of India India's largest bank too has tightened its account opening process. A senior official in SBI informed that as the bank has computerized most of its branches and an account can be operated from anywhere in the country, therefore bank is taking extra caution in implementing the KYC norms. Besides, the bank is also rechecking existing customers' account opening documents. In case the find any shortcomings in establishing the identity of the account holders, the account is immediately frozen until the customer provides all details required by the bank.

Some officials said that in certain states like Kerala, the police is carefully working with branch offices and passing on information. "While we have no written communication from the authorities concerned, but police officers are telling us to be more vigilant when it comes to opening new accounts in Kerala,'' P Y Nagar, general manager, Union Bank of India, told TOI.

The verification process has been made stricter and, in some cases, banks are double checking information provided by customers. "While there is no change in the documentation per-se, there is closer scrutiny than before and we can't afford to take everything at face value,'' explains Reddy.

According to the KYC norms of the Reserve Bank with respect to customer acceptance policy (no account is opened in anonymous or fictitious/benami names), customer identification procedure (like proof of residence and identity) and monitoring of transactions (where banks are expected to pay special attention to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose).

An anonymous senior official from Indian Overseas Bank (IOB) said, "We are now closely monitoring those transactions where there is a huge inflow/outflow of money within a single day or a short time period. We also ask for salary details of customers''.

While some bank officials uphold that they haven't received any circular from RBI after the terror attack, but have intensified checks under KYC norms independently. Sources in Punjab National Bank (PNB) maintained they have never been lenient in following the KYC norms, due to the increasing frequency of terrorist attacks.

In some cases, the strictness done by the bank is not felt by the customer. Over the past few days, one person opened a new account with a large private sector bank in Mumbai. After the submission of all the documents, it took just a day to open the account. Another person, after completing all the requirements for opening an account, also opened an account with a large PSU bank. Private Banks are also strictly implementing the norms. An ICICI Bank official informed that the bank has issued letters to its branch managers not to compromise the KYC norms at any cost. Other private sector banks like HDFC Bank and Yes bank stated that they have also instructed their branch managers not to compromise on the safety issue.