SUNDAY SERVICES ON BANKING DEVELOPMENTS BANKING NEWS DT. 08.11.2013 1.Central Bank opens liaison office in Hong Kong. Business Line / Mumbai / Nov 7: The third largest public sector lender by branches Central Bank of India today said it has opened a representative office in Hong Kong. The representative office will facilitate the bank to tap the huge business potential in the thriving island city by providing marketing and liasoning, its chairman and managing director Rajeev Rishi said in a statement. He said the office will not engage in core banking but will use its local presence to explore business opportunities with the aim of establishing a long—term presence and penetrate the markets. 2. Karnataka Bank ups deposit rates - Business Line / Mangalore / Nov. 7: Karnataka Bank has hiked interest rates on domestic term deposits by 25 basis points. The revised rates will be effective from November 7, said a press statement by the bank. Following are the revised rate of interest for different maturities: 8 per cent for 121-180 days, and 8.50 per cent for 181-364 days. In the maturity band of one-two years, the bank will offer 9.50 per cent for deposits below Rs 5 crore, and 9.25 per cent for deposits above Rs 5 crore. In the case of two-three-year tenures, the bank will offer 9.25 per cent for deposits below Rs 5 crore, and 9 per cent for deposits above Rs 5 crore. For term deposits above three years, the rate is 9 per cent. 3. Base rate hike: Other banks may not ape HDFC Bank, SBI - Business Line / Mumbai/ Nov. 6: While HDFC Bank and State Bank of India have hiked their base rates, most other banks are likely to keep their rates unchanged. On Tuesday, HDFC Bank, India’s second largest private bank, became the first lender, post-policy, to raise its base rate (the rate below which banks do not offer loans) by 20 basis points to 10 per cent. On Wednesday, India’s largest bank SBI also raised its base rate by a similar margin. However, others such as Bank of India and Bank of Baroda do not plan to hike their base rates any time soon. “We are unlikely to go for a base rate hike as of now,” said V. R. Iyer, Chairperson and Managing Director, Bank of India. BoB Chairman S. S. Mundra said: “We have decided to maintain status quo on our base rate. The liquidity and deposit growth will be looked at while deciding the base rate. We are comfortable with the liquidity at present. HDFC Bank can afford a rate hike as their base rate is still the lowest.” Some rationalisation by way of a marginal increase in interest rates on deposits could take place, an official at YES Bank said. Further, bankers are expecting liquidity measures to be eased before the next monetary policy review in December. Canara Bank’s base rate is now the lowest in the industry at 9.95 per cent, followed by SBI, ICICI Bank, HDFC Bank and Oriental Bank of Commerce at 10 per cent. The upward revision in the base rate by SBI and HDFC Bank follows the RBI hiking the key policy rate (repo) by 25 bps to 7.75 per cent in its second quarter monetary policy review on October 29. In addition, the RBI also cut the marginal standing facility (MSF) rate by an identical margin to 8.75 per cent. Repo rate is the rate at which banks borrow funds from RBI. The hike in repo rate increases banks’ cost of borrowing from the RBI, while the MSF cut reduces the cost of short-term money, such as commercial papers and certificates of deposits as well as overnight call money. 4. SBM Q2 profit tumbles 79% - Business Line / Bangalore / Nov. 6: State Bank of Mysore saw its profit drop 79.30 per cent to Rs 30.08 crore in the second quarter of this fiscal from Rs 145.35 crore in the same period last year. Profits fell due to fresh slippages in its exposure to the corporate sector. However, total income during the quarter rose a marginal 4.85 per cent to Rs 1,687.70 crore (from Rs 1,609.55 crore last year). The EPS (basic) stood at Rs 6.33 (Rs 31.06). The bank’s deposits as on September 30, stood at Rs 57,319.78 crore (last year Rs 50,921.43 crore last year). 5. BoI not to raise base rate now - Business Line / Mumbai / Nov 6: After largest lender State Bank of India (SBI) and second largest private sector bank HDFC Bank raised their minimum lending rate (base rate), public sector lender Bank of India (BoI) today ruled out following its peers for now. “As of now I don’t feel the need to increase the base rate,” the bank’s Chairperson and Managing Director Vijayalakshmi Iyer told reporters here. But she was quick to add that “we also need to be in the market place. We have to watch out because my liquidity condition is very comfortable now and deposit growth in H1 was also quite significant. We will see and definitely take a call on base rate.” She said the bank’s risk management committee is looking into the matter. State Bank today revised its base rate by 20 basis points to 10 per cent from 9.80 per cent. It also increased the benchmark prime lending rate by a similar amount from 14.55 per cent to 14.75 per cent. Earlier this month, SBI raised fixed deposit rate by 0.2 per cent on select maturity. Second largest private sector bank HDFC Bank has also increased its minimum lending rate by 20 basis points to 10 per cent. The move came after the Reserve Bank last week increased repo rate by 25 basis points to 7.75 per cent in its second quarter policy review. The October 29 hike was the second in two months. The RBI also lowered the marginal standing facility rate by 25 basis points from 9 per cent to 8.75 per cent. 6. J&K Bank reappoints Ahmed as Chairman & CEO - Business Line / Mumbai / Nov 6: Jammu and Kashmir Bank has reappointed Mushtaq Ahmad as its Chairman and CEO for a period of another three years. Ahmed’s term with the private sector bank ended on October 6 this year. He has been the Chairman and CEO of the bank since October 2010. The Reserve Bank of India conveyed its approval to the reappointment of Mushtaq Ahmad as Chairman and CEO of the bank for a period of three years with effect from expiry of his present term on October 6, 2013; the bank has informed the Bombay Stock Exchange. Ahmed served as an Additional Director of J&K bank from September 22, 2010 to October 2010. 7. Fin Min shortlists EDs for top job in six govt banks - Business Standard / Mumbai / Nov 7, 2013 The Union finance ministry has shortlisted the names of executive directors (EDs) likely to head public sector banks (PSBs) in 2014-15. Six PSBs will see its chairmen and managing directors (CMDs) retiring in 2014-15 -- Bank of Baroda (BoB), Indian Overseas Bank (IOB), Canara Bank, Oriental Bank of Commerce (OBC), Vijaya Bank and United Bank of India. The selection panel of, among others, Anand Sinha, deputy governor, Reserve Bank of India and Rajiv Takru, secretary, financial services in the ministry of finance, interviewed 19 EDs last week. Sources indicate Arun Srivastava, an ED in Bank of India has been identified to head IOB, S K Kalra of Andhra Bank might get the charge of Canara and B B Joshi of BoB might head for OBC. R K Goel of Central Bank of India might get Vijaya Bank and M K Jain of Punjab & Sind bank may get the top job in Kolkata-based United Bank. Aswini Kumar, who is CMD of Dena Bank, might get a chance to lead BoB, as the finance ministry is contemplating a return to the process of lateral transfers. The system of appointing CMDs in small PSBs to larger ones had been stopped since last year. The vacancy at Dena Bank will then be filled by Arun Tiwari, an ED at Allahabad Bank. For the present round of selection, the ministry had relaxed the norms for selection of CMDs. The norm that a candidate needed to complete a year as ED to become eligible was relaxed. However, the criterion for residual service of two years of a candidate remained. The first vacancy will come only in August 2014, after the general elections, when the BoB and IOB top posts become vacant. Though the candidates have been identified, clearance from the Central Vigilance Commission can only be had a month or two prior to the appointment. THE HOT SEAT Six PSBs whose chairmen and managing directors are retiring in 2014-15 * Bank of Baroda * Indian Overseas Bank * Canara Bank * Oriental Bank of Commerce * Vijaya Bank * United Bank of India 8. Centre sets Rs 1-lakh-cr retail loan disbursal target for PSBs - Business Standard / Mumbai / November 7, 2013 The finance ministry expects public sector banks to disburse about Rs 1,00,000 crore of consumer loans at low rates this festive season, say bankers familiar with the development. “During our discussion with the finance minister, it was decided public sector banks would lend Rs 1,00,000 crore to their retail customers. To revive economic growth, these loans would be made available at low rates of interest. Additional capital would be provided by the government depending on the performance of each bank,” said a senior executive of a mid-sized public sector bank (PSB), requesting anonymity. Bankers said several public sector banks had already taken initiatives to offer retail loans at low prices. While some banks had started offering these loans at the base rate (the minimum lending rate), most had waived fees and processing charges on vehicle finance and mortgages. A few banks have introduced easy finance schemes for the purchase of television sets, refrigerators, air conditioners, computers and other electrical and electronic gadgets. “Individually, banks have not been given a specific target. We have set an internal target of disbursing additional consumer loans during this festive period, based on our market share,” said the general manager and head of retail banking at a PSB. However, the rising cost of funds has led to doubts on whether banks would be able to continue their consumer loan offers at low interest rates. State Bank of India has already announced it would increase its minimum lending rate by 20 basis points, effective Thursday. Last week, private sector lender HDFC Bank had increased its base rate by 20 basis points. Concerns have also been raised over asset quality deterioration, as the last few months have seen fresh slippages in retail advances. At an aggregate level, the net non-performing asset ratios of banks in India had risen annually as of March-end 2013. During this period, public sector banks had seen the highest rise (49 basis points) in bad loan ratio. 9. Womens bank skips Delhi launch due to Assembly polls - Business Standard / New Delhi / November 8, 2013 To be inaugurated by FM in Mumbai on Nov 19 Indias first all women bank, Bhartiya Mahila Bank, will be launched by Finance Minister P Chidambaram on 19 November from Mumbai and not from its headquarter New Delhi, thanks to the model code of conduct for Assembly polls which is in place. The government wanted to inaugurate the bank from Delhi on the birth anniversary of former Prime Minister Indira Gandhi, but it didnt get the permission from the Election Commission in view of polls, which are due on December 5. Chidambaram will now launch six of its eight branches--Kolkata, Guwahati, Chennai, Bangalore, Lucknow and Mysore--from Mumbai through a video link. Jaipur and Indore will have to wait for launch because of the code of conduct. All work has been completed. But whether we can do it on 19 November, whether we can do it in Delhi or in other city, these are matters my secretary is discussing with the Election Commission, Chidambaram had told a press conference last week. Treasury operations of the bank, to be headed by Usha Ananthasubramanian, Executive Director of Delhi-based Punjab National Bank, would also be carried out from Delhi. The bank will start with 250 employees. The finance ministry has earlier asked public sector banks to provide 125 officers for deputation to the women-focused lender. Most of these officers are being taken at one level above in the womens bank, but their experience here would not count for promotions. In Budget 2013-14, the finance minister had announced setting up of Bharatiya Mahila Bank, with an initial capital of Rs 1,000 crore. A five-member panel, headed by former Canara Bank CMD MBN Rao had prepared the blueprint for the bank. Its key objective is to focus on banking needs of women and promoting economic empowerment. 10. India may find few takers for new foreign bank rules - Economic Times / Mumbai / 7 Nov, 2013 Indias move to encourage foreign banks such as Citigroup and HSBC Holdings to reposition as wholly-owned subsidiaries may find just a handful of takers, given the regulatory trade-off. Under RBI rules announced late on Wednesday, foreign banks which convert their local operations from a branch structure to being subsidiaries will be treated on nearly equal terms with local lenders. This could open the way to them opening more outlets across India and could also allow them to buy local private sector banks - potentially a major lure as banks seek to tap into the fast-growing Indian economy. The rules are aimed at giving India greater regulatory power over foreign banks in the wake of the global financial crisis. Yet foreign banks would also face a bigger regulatory burden in the subsidiary setup, including having to earmark 40 per cent of their lending to the priority sector, which includes underserved parts of the economy and agriculture. Thats a requirement that domestic banks must already meet and is being phased in for foreign banks with 20 or more branches. As a subsidiary, a foreign bank would also need approval to tap its parents balance sheet, something it doesnt need under existing rules. The new rules come as global financial firms have been paring back their investment in non-core markets. The environment has changed, both in India and overseas. Only a handful of banks who have retail banking ambitions will consider it, said a senior banker with a large US bank, declining to be named given the sensitivity of the matter. The 43 foreign banks in India account for less than half a per cent of the countrys 92,114 banking outlets. Under existing rules, foreign banks can open up to just 12 branches between them per year in India. Citigroup, HSBC and Standard Chartered are the biggest and operate as branches, not subsidiaries. They along with Singapore-based DBS Group Holdings Ltd, which has 12 branches, are widely seen as the likeliest to consider switching to subsidiaries. If you look at Citi, StanC or HSBC, they have an embedded India strategy, so it makes a lot of sense for them to convert because they are getting near-national treatment, said Abizer Diwaji, national leader for financial services at EY India. The flip side is that they will have to commit (more) capital in India. Achievable target DBS India CEO Sanjiv Bhasin said the bank was evaluating the RBI guidelines. If you read it, it looks intimidating, but the fact is you have been given five years, Bhasin said, referring to the priority sector lending target. Its difficult but its certainly achievable. Citigroup and HSBC declined comment. StanChart welcomed the guidelines but said it was too early to comment in detail. In recent years, Barclays has exited retail banking in India and Royal Bank of Scotland has sold its Indian credit cards, mortgage and commercial banking portfolios, part of a broader trend by global banks looking to shore up their capital base to meet regulatory requirements. Most of the foreign banks in India have moved away from retail banking and are now focusing on corporate banking, said the India operations head of a European bank who declined to be named. Under the new rules for wholly-owned subsidiaries, foreign banks can buy a local private-sector lender after a central bank review of overall foreign bank penetration. To prevent foreign domination of the banking sector, the central bank will restrict further entry of new wholly owned subsidiaries of foreign banks if the assets of institutions owned abroad exceed 20 per cent of the countrys total. Currently, foreign banks capital, reserves and surplus account for 15 per cent of the overall banking sector, even though foreign banks have less than 5 per cent of industry deposits, leaving little room for big acquisitions. Indias banking system is dominated by state banks, which accounted for more than two-thirds of industry assets at the end of March 2012, the latest RBI data showed. Foreign banks operating in India before August 2010 have the option of continuing as branches. However, they will be incentivized to convert into WOS (wholly owned subsidiaries) because of the attractiveness of the near-national treatment afforded to WOS, the central bank said.
Posted on: Sun, 10 Nov 2013 12:42:17 +0000
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