On Tuesday Union finance minister Mr P Chidambaram is going to have meeting with the heads of public sector banks and is likely to come under pressure as economic growth likely to slow down to 8.7 per cent this financial year. It is expected the finance minister ask them to raise lending to the manufacturing sector and cut interest rates.
“Some public sector banks have already reduced interest rates, but other banks should also bring down interest rates considering there is ample liquidity in the system and deposit rates have come down,” official sources said.
The official sources informed that the main focus of the meeting is likely to be on “banks' role to meet Budget targets, their performance apart from credit quality and delivery to the target sectors”.
The meeting is supposed to have significance as it comes on the heels of the Reserve Bank maintaining status quo in key rates.
It is likely, the finance minister, who met RBI Governor Dr YV Reddy on Saturday, have discussed measures to moderate the possible rise in capital inflows besides steps to raise credit to the productive sectors and for consumer goods to ensure better GDP figures in the fourth quarter.
According to the advance approximation by Central Statistical Organization, manufacturing output growth is expected to slow down to 9.4 per cent this fiscal against 12 per cent in the financial year 2006-07.
It is expected in the industrial activities, construction is likely to grow by 9.6 per cent against 12 per cent last fiscal.
Monday, February 11, 2008
Saturday, February 9, 2008
Central Bank of India and Mashreq Bank enter into tie-up for US Branch
According to press release issued by the public sector lender, Central Bank of India, on Friday it has entered into a tie-up with Mashreq Bank.
As per this agreement all trade transactions and remittances denominated in US Dollars relating to the US, will be handled by Mashreq Bank through a dedicated desk. The desk would be like a virtual branch of Central Bank.
The press release stated through this arrangement, Central Bank would be able to take the benefits of operational capabilities of Mashreq Bank, New York, for various business operations.
The tie-up further will provide flexibility to Central Bank to invest funds with institutions of its choice forgetting higher return. "The virtual branch scenario is expected to bring down the cost of transactions which will be beneficial to the bank's customers," the release added.
The desk will make easy for quick response to customer queries and fast realization.
"Overall, the tie-up for virtual branch will enable Central Bank of India to provide more efficient and timely service to the exporter and importer community," the release said.
As per this agreement all trade transactions and remittances denominated in US Dollars relating to the US, will be handled by Mashreq Bank through a dedicated desk. The desk would be like a virtual branch of Central Bank.
The press release stated through this arrangement, Central Bank would be able to take the benefits of operational capabilities of Mashreq Bank, New York, for various business operations.
The tie-up further will provide flexibility to Central Bank to invest funds with institutions of its choice forgetting higher return. "The virtual branch scenario is expected to bring down the cost of transactions which will be beneficial to the bank's customers," the release added.
The desk will make easy for quick response to customer queries and fast realization.
"Overall, the tie-up for virtual branch will enable Central Bank of India to provide more efficient and timely service to the exporter and importer community," the release said.
Friday, February 8, 2008
PNB following downward interest rate scenario cuts home loan rates
First the second largest private sector bank HDFC following the guidelines of the RBI reduced home loan rates. Working on the same lines PNB Housing Finance, a subsidiary of Punjab National Bank, reduced home loan rates by 50 basis points for new borrowers.
“In view of the downward interest rate scenario, the company has decided to reduce interest rates on home loans for new borrowers by 0.50 percentage points with immediate effect,” PNB Housing said in a press release.
During the nine months ended December 31 the company reported 76% growth in net profit at Rs 28.87 crore. The total income of the company rose 51% to Rs 159.97 crore during April-December 2007 compared with Rs 106 crore in the year-ago period.
VK Khanna, managing director, PNBH, said: “The company is looking at a higher business volume in the coming months. It is entering into tie-ups for promoting individual loans in the projects of various builders across the country."
Punjab National Bank had recently said that it planned to either register PNB Housing Company or introduce a strategic partner into the company.
The net worth of the company was Rs 156.60 crore, as on December 31, 2007. The book value per share was Rs 52.20, as on December 31.
“In view of the downward interest rate scenario, the company has decided to reduce interest rates on home loans for new borrowers by 0.50 percentage points with immediate effect,” PNB Housing said in a press release.
During the nine months ended December 31 the company reported 76% growth in net profit at Rs 28.87 crore. The total income of the company rose 51% to Rs 159.97 crore during April-December 2007 compared with Rs 106 crore in the year-ago period.
VK Khanna, managing director, PNBH, said: “The company is looking at a higher business volume in the coming months. It is entering into tie-ups for promoting individual loans in the projects of various builders across the country."
Punjab National Bank had recently said that it planned to either register PNB Housing Company or introduce a strategic partner into the company.
The net worth of the company was Rs 156.60 crore, as on December 31, 2007. The book value per share was Rs 52.20, as on December 31.
Thursday, February 7, 2008
Central bank of India and Thomas Cook sign a deal for money transfer service
An agreement between state-owned Central Bank of India (CBI) and leading outbound travel agency Thomas Cook was signed to offer a money transfer service via MoneyGram International, a leading global payment service.
Since 1997 Thomas Cook has been a partner of MoneyGram in India.
"We are pleased to offer MoneyGram Money Transfer Services through our branches. Non-resident Indians (NRIs) and their family members can use these services," bank chairperson and managing director H.A. Daruwalla said.
Transfer of funds to India from US, Britain, Canada, Australia and the UAE, is very high as large number of NRIs settled in these countries. With the starting of this service people will be able to do transactions easily.
"Reaching to our customers is very important and they can complete their transactions at high levels of convenience," Thomas Cook (India) Managing Director Madhavan Menon said.
According to MoneyGram's regional director for south Asia Harsh Lambah, the Central Bank of India is having a network of 3282 branches through which it can provide convenient and reliable money transfer services anywhere.
Since 1997 Thomas Cook has been a partner of MoneyGram in India.
"We are pleased to offer MoneyGram Money Transfer Services through our branches. Non-resident Indians (NRIs) and their family members can use these services," bank chairperson and managing director H.A. Daruwalla said.
Transfer of funds to India from US, Britain, Canada, Australia and the UAE, is very high as large number of NRIs settled in these countries. With the starting of this service people will be able to do transactions easily.
"Reaching to our customers is very important and they can complete their transactions at high levels of convenience," Thomas Cook (India) Managing Director Madhavan Menon said.
According to MoneyGram's regional director for south Asia Harsh Lambah, the Central Bank of India is having a network of 3282 branches through which it can provide convenient and reliable money transfer services anywhere.
Tuesday, February 5, 2008
PSU banks cut home loan rates
Amongst the private sector banks last week HDFC announced the cut in home loan rates, while ICICI, the leader among private banks in home loans, still have to decide on lending rate cuts. Earlier RBI had asked the PSU banks to reduce the rates and the moral suasion has worked. State-owned banks have begun bringing down lending rates even without a cut in benchmark rates by RBI.
Close on the heels of HDFC, on Tuesday Canara Bank and Allahabad Bank announced cuts in lending rates.
State-controlled Canara Bank and Allahabad Bank have slashed the lending rates by 0.25 percentage points and 0.5 to 0.75 percentage points respectively. Taking the signals from the Reserve Bank of India Governor YV Reddy in the credit policy on January 29, paving the way for other banks to follow, HDFC was the first bank to cut the rates.
Canara Bank, the third largest bank in the country, has cut home loan rates by 0.25 per cent almost across the board. Currently, the bank’s home loan below Rs 20 lakh for five years is priced at 10 per cent and a long-end loan for 25 years will cost 10.5 per cent per annum.
“The decision is in line with the expected softening of interest rates. However, a cut in rates of other loans will be considered later," Canara Bank chairman MBN Rao told Hindustan Times. Although the growth in the corporate sector is at a robust pace, but credit growth will remain within the Reserve Bank-targeted level of 24 per cent. However this step will encourage small industries and households to seek loans.
Allahabad Bank chairman AC Mahajan informed the cut in housing loans is 0.5-0.75 percentage points, education loans by 0.25-1.00 percentage points and while consumer durable rates by one percentage point following a fall in the incremental cost of funds.
Addressing the reporters at a conference ICICI Bank's chief executive officer KV Kamath said that the bank is keeping an eye on the interest rates trends, which usually go up during the last quarter, before taking a decision on a possible cut.
Close on the heels of HDFC, on Tuesday Canara Bank and Allahabad Bank announced cuts in lending rates.
State-controlled Canara Bank and Allahabad Bank have slashed the lending rates by 0.25 percentage points and 0.5 to 0.75 percentage points respectively. Taking the signals from the Reserve Bank of India Governor YV Reddy in the credit policy on January 29, paving the way for other banks to follow, HDFC was the first bank to cut the rates.
Canara Bank, the third largest bank in the country, has cut home loan rates by 0.25 per cent almost across the board. Currently, the bank’s home loan below Rs 20 lakh for five years is priced at 10 per cent and a long-end loan for 25 years will cost 10.5 per cent per annum.
“The decision is in line with the expected softening of interest rates. However, a cut in rates of other loans will be considered later," Canara Bank chairman MBN Rao told Hindustan Times. Although the growth in the corporate sector is at a robust pace, but credit growth will remain within the Reserve Bank-targeted level of 24 per cent. However this step will encourage small industries and households to seek loans.
Allahabad Bank chairman AC Mahajan informed the cut in housing loans is 0.5-0.75 percentage points, education loans by 0.25-1.00 percentage points and while consumer durable rates by one percentage point following a fall in the incremental cost of funds.
Addressing the reporters at a conference ICICI Bank's chief executive officer KV Kamath said that the bank is keeping an eye on the interest rates trends, which usually go up during the last quarter, before taking a decision on a possible cut.
3 arrested for Rs 27-lakh bank fraud
In Kolkata a promoter, Chiranjeet Saha, along with two others were arrested on Monday on charges of attempting a Rs 27-lakh fraud at a nationalized bank in Salt Lake.
Police told Saha, along with three others, walked into a nationalized bank at BE Block to encash three bank drafts, worth Rs 9 lakh each. While encashing those, bank officials found something suspicious about the drafts as the banks officials were aware that Saha had allegedly been involved in a fraud earlier.
The officials asked Saha and his men to wait while they called up the draft issuing bank branch.
It was then discovered that the said bank did not issued any such draft to Saha and the drafts were found to be forged. Saha also had a nominal sum left in his account.
Saha and the three others were apprehended and police was called. After cross-examination, one of the three was allowed to go while Saha and two others were arrested.
Police told Saha, along with three others, walked into a nationalized bank at BE Block to encash three bank drafts, worth Rs 9 lakh each. While encashing those, bank officials found something suspicious about the drafts as the banks officials were aware that Saha had allegedly been involved in a fraud earlier.
The officials asked Saha and his men to wait while they called up the draft issuing bank branch.
It was then discovered that the said bank did not issued any such draft to Saha and the drafts were found to be forged. Saha also had a nominal sum left in his account.
Saha and the three others were apprehended and police was called. After cross-examination, one of the three was allowed to go while Saha and two others were arrested.
Monday, February 4, 2008
RBI in its policy review opts for flexible policy financial scene
The Reserve of India’s in its third quarter monetary policy review did not change any of its policy rates — the Bank Rate, the repo rate and the reverse repo rate and this has become the focal point of discussion on the subject. RBI has not touched the cash reserve ratio, while the central bank has clearly chosen status quo in so far as interest rates are concerned. Whereas individual banks, have been urged to lower lending rates. Moral suasion helps up to a point while even overt signaling devices, for instance a reduction in CRR or repo rate, need not always work.
While as a rule public sector banks, are following the suggestions, especially if they come from the Finance Minister. In mid-October last year on one widely publicized occasion, the Finance Minister had convinced banks to reduce their interest rates on car loans. To give respite to auto sales was given as the reason for the intervention.
May be such instances will become part of history as they do not leave good impression on the autonomy of the monetary authorities.
At present the Finance Minister has publicly authorized the RBI’s stand of not changing the policy rates. Functional though it may be, but it does give the central bank the flexibility to increase or decrease the rates depending on the emerging domestic and global situations. Moreover, through a conscious decision, the RBI wanted to convert monetary policy statements into ‘non-events’. Even though increasing the frequency of policy statements from two to four in a year, the central bank had made it clear that it is not necessary making rate changes will be always be a part of each policy statement. Such de-linking gives flexibility to the central bank.
However, on the eve of its latest policy review, there were more assumptions than the usual level as to what the RBI would do with its rates. Most of them thought that it would reduce the rates, for this there were several reasons why their expectation was not baseless.
Week ahead to the central bank policy review, the U.S. Federal Reserve (Fed) had cut its federal funds rate by a massive 0.75 percentage points mainly to encourage the U.S. economy that was seen as sliding into a recession. On stock exchanges prices had crashed across the globe. As the result of the rate cut, there was some recovery but that proved short-lived. On January 30, after the announcement of the RBI’s review, the U.S. Fed further reduced the fed funds rate by another 0.50 percentage points.
Such massive interest rate reductions done by U.S. Fed have several implications for India and other emerging economies too. Many of them among a large section of market analysts had expected that other countries, including India, will follow suit, perhaps not to deflect a decline as in the U.S. but to remain competitive and encourage growth.
In India, economic growth continues to be strong but there are signs of a slowdown in manufacturing and to a lesser extent in services. For the current year almost all recent gross domestic product (GDP) forecasts have been less cheerful giving signal that the second half of 2007-08 would see a much slower growth than the average 9.1 per cent recorded in the first six months. It was thought that two sectors, consumer durables and transportation equipment, which have been slowing down and an interest rate reduction in India, will help in their recovery. Though not changing of interest rates looked equally strong but were based almost entirely on considerations of price stability. Inflation, which has always been a major worry for most central banks, is right back at centre stage of monetary policy.
However inflation numbers has been below 4 per cent but rise can been seen in the recent weeks. Globally, oil prices are going to remain high though Indian consumers continue to be insulated. Then there is the ‘food inflation’ caused partly by record prices of wheat, corn and other cereals.
There has been growth in the money supply and bank deposits, ahead of targets while non-food credit from banks is sharply lower. The surplus of liquidity is a cause for worry. The RBI is hoping to hold inflation within 5 per cent this year and anchors expectations in the region of 4-4.5 per cent over the medium term.
As always, the RBI have to tackle several — often conflicting — objectives simultaneously. Maintaining price stability while providing for the credit needs of the economy has always been a dilemma. There is also the question of balancing short-term considerations with those of the medium term. The RBI has been clearly indicating that the complexities of monetary management are such that there is a requirement of substantial flexibility to deal with the emerging situations both in India and abroad. What’s more, fiscal policies should supplement monetary policies even for achieving monetary goals.
For instance, steady accumulation to the RBI’s forex assets has contributed to the huge growth in reserve money. A major portion of the assets build-up is owing to large portfolio investments in the stock market. The RBI’s actions of first sterilizing the dollar flows and then trying to clean up domestic liquidity — through market stabilization schemes and so on — are the classic monetary policy fix. Fiscal policy obviously comes into play in several ways. The debate over better utilization of forex reserves cannot be done in isolation from the quasi-fiscal costs that are incurred in keeping the reserves in safe, but low yielding instruments such as U.S. government paper.
Lastly, the RBI in sticking to its GDP growth target of 8.5 per cent for the current year, is not necessarily conservative. Days after the monetary policy review, the Finance Minister, is expecting the economy to grow at closer to 9 per cent which will be not substantially higher than earlier official forecasts.
While as a rule public sector banks, are following the suggestions, especially if they come from the Finance Minister. In mid-October last year on one widely publicized occasion, the Finance Minister had convinced banks to reduce their interest rates on car loans. To give respite to auto sales was given as the reason for the intervention.
May be such instances will become part of history as they do not leave good impression on the autonomy of the monetary authorities.
At present the Finance Minister has publicly authorized the RBI’s stand of not changing the policy rates. Functional though it may be, but it does give the central bank the flexibility to increase or decrease the rates depending on the emerging domestic and global situations. Moreover, through a conscious decision, the RBI wanted to convert monetary policy statements into ‘non-events’. Even though increasing the frequency of policy statements from two to four in a year, the central bank had made it clear that it is not necessary making rate changes will be always be a part of each policy statement. Such de-linking gives flexibility to the central bank.
However, on the eve of its latest policy review, there were more assumptions than the usual level as to what the RBI would do with its rates. Most of them thought that it would reduce the rates, for this there were several reasons why their expectation was not baseless.
Week ahead to the central bank policy review, the U.S. Federal Reserve (Fed) had cut its federal funds rate by a massive 0.75 percentage points mainly to encourage the U.S. economy that was seen as sliding into a recession. On stock exchanges prices had crashed across the globe. As the result of the rate cut, there was some recovery but that proved short-lived. On January 30, after the announcement of the RBI’s review, the U.S. Fed further reduced the fed funds rate by another 0.50 percentage points.
Such massive interest rate reductions done by U.S. Fed have several implications for India and other emerging economies too. Many of them among a large section of market analysts had expected that other countries, including India, will follow suit, perhaps not to deflect a decline as in the U.S. but to remain competitive and encourage growth.
In India, economic growth continues to be strong but there are signs of a slowdown in manufacturing and to a lesser extent in services. For the current year almost all recent gross domestic product (GDP) forecasts have been less cheerful giving signal that the second half of 2007-08 would see a much slower growth than the average 9.1 per cent recorded in the first six months. It was thought that two sectors, consumer durables and transportation equipment, which have been slowing down and an interest rate reduction in India, will help in their recovery. Though not changing of interest rates looked equally strong but were based almost entirely on considerations of price stability. Inflation, which has always been a major worry for most central banks, is right back at centre stage of monetary policy.
However inflation numbers has been below 4 per cent but rise can been seen in the recent weeks. Globally, oil prices are going to remain high though Indian consumers continue to be insulated. Then there is the ‘food inflation’ caused partly by record prices of wheat, corn and other cereals.
There has been growth in the money supply and bank deposits, ahead of targets while non-food credit from banks is sharply lower. The surplus of liquidity is a cause for worry. The RBI is hoping to hold inflation within 5 per cent this year and anchors expectations in the region of 4-4.5 per cent over the medium term.
As always, the RBI have to tackle several — often conflicting — objectives simultaneously. Maintaining price stability while providing for the credit needs of the economy has always been a dilemma. There is also the question of balancing short-term considerations with those of the medium term. The RBI has been clearly indicating that the complexities of monetary management are such that there is a requirement of substantial flexibility to deal with the emerging situations both in India and abroad. What’s more, fiscal policies should supplement monetary policies even for achieving monetary goals.
For instance, steady accumulation to the RBI’s forex assets has contributed to the huge growth in reserve money. A major portion of the assets build-up is owing to large portfolio investments in the stock market. The RBI’s actions of first sterilizing the dollar flows and then trying to clean up domestic liquidity — through market stabilization schemes and so on — are the classic monetary policy fix. Fiscal policy obviously comes into play in several ways. The debate over better utilization of forex reserves cannot be done in isolation from the quasi-fiscal costs that are incurred in keeping the reserves in safe, but low yielding instruments such as U.S. government paper.
Lastly, the RBI in sticking to its GDP growth target of 8.5 per cent for the current year, is not necessarily conservative. Days after the monetary policy review, the Finance Minister, is expecting the economy to grow at closer to 9 per cent which will be not substantially higher than earlier official forecasts.
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